Friday, January 23, 2015

When SGD > MYR rises from 2.3 to 2.7

Malaysians who work in Singapore may be happy when the currency conversion rate of SGD:MYR rises. Most recently, due to the oversupply of international oil, the price drop significantly from USD110 per barrel to less than USD50 per barrel, which is more than 50% of drop.

Malaysia as a petroleum exporter, which its 30% income relies on this commodity, is very much affected by this plunge of international oil price. This directly affect the MYR currency drops as well.

Well, as typical residents, or consumers who works in Singapore, how does the rise of SGD:MYR affects us?

The Benefit: Malaysia loan become cheaper
If we bought a car or house several years ago in Malaysia, we who earn SGD will definitely feel cheaper to pay the loan.

Loan interests is fixed, and monthly payment is constant. Which means, if we are paying RM1000/month since the first year of the loan, we are paying the same until the end of the loan.

Let say when we buy the car, the SGD:MYR rate is 1:2.3. Which means, RM1000 is just SGD434.78. Today, it's almost 1:2.7. RM1000 is equals to SGD370.37. It's a SGD64.41 difference, or RM173.91. And this is monthly! One year, we might save another RM2086.96 if the rate is same and we earn the SGD.

The Unseen: Malaysia consumer price will gets increase
We might merely see the rise of SGD over MYR is a good thing. But, as Malaysians, we should know that the rise is not because of well-being of Singapore economy, but it's under-performance of Malaysia.

Malaysia economy is having so much pressure, as Malaysians, we should know, such as international oil price plunges, political corruption, commodity competitors (Indonesia as first oil palm exporter).

If we are earning SGD, our currency value is just protected, but not appreciated (increase). For example, RM2.30 for one bowl of mee soup few years back become RM2.70 today. It's always equivalent to SGD1! But, this is only my conservative calculation. Do you think it's only RM2.70 today? No way!

When consumer price increase, spending SGD in Malaysia doesn't make any difference for us. But yes, at least we are protected and our consumer power is the same, as compared to others who earning MYR.

The Unseen 2: Price is still the same in Singapore
Working in Singapore means spending in Singapore. We need to spend on our food, accommodation, transportation etc. If these expenses never reduce, we should never say SGD rises. The rising of SGD over MYR is just a relative, not an absolute value.

In fact: Inflation everywhere!
Unfortunately, no matter where we work, inflation is everywhere! We are always facing the price hike at every country. Even the used-to-be-deflation country - Japan, has introduced the tax rate of 8%, double up from previous 4%, just to make the investors happy by appreciating the value of everything.

Do you still think your SGD salary has increased?

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