KUALA LUMPUR, Oct 15 — The average Malaysian may be better paid and have more cash to spare than a year ago but his confidence is taking a nose dive due to spiralling living costs and fears that he can keep his job, the country’s fifth-largest bank group has reported.

According to AmBank, the Consumer Sentiment Index (CSI) in 2013’s second quarter underwent its steepest plunge since the fourth quarter of 2008, when a global financial crisis erupted following the bankruptcy of US-based financial services firm Lehman Brothers.

“The drop in consumer sentiment raised our eyebrows, especially with the rationalisation of the subsidy by the government and increasing uncertainties on the global economic front. We fear consumer sentiment may weaken further, going forward,” said AmBank chief economist Anthony Dass in an October 11 report.

“We believe the sharp drop in consumer confidence in 2Q2013 is due to increasing consumers’ concern on the job prospects,” he said, and added that the drop is happening despite an increase in the average national income.

Latest data from sources show that the average national income in 2012 grew by 24 per cent from RM4,025 to RM5,000.

The biggest increase has been in the services sector where average income rose by 39 per cent, followed by agriculture at 36 per cent.

But AmBank claimed that public sentiment will be further weighed down by rising living cost, especially following a series of subsidy cuts by Putrajaya to lower its budget deficit.

“Also, potential job opportunities will dampen their sentiments, especially with the ongoing global economic uncertainties that will add downside risk to the global economic outlook including Malaysia,” added Dass.

Malaysia has embarked on a series of fiscal consolidations, starting with raising the pump price of RON95 petrol and diesel by RM0.20 per litre starting from September 3, to RM2.10 and RM2.00 per litre respectively.

The subsidy cut was announced by Putrajaya following global ratings agency Fitch which revised Malaysia’s sovereign debt outlook from “Stable” to “Negative” in July.

AmBank highlighted that although a 5 per cent rise in living cost will hurt those earning less than RM2,000 per month, an increase of 15 per cent will hurt even those earning RM5,000 a month and below.

A further increase of 20 per cent in living cost will hurt those who earn RM4,000 per month and below the most, it said.

As such, AmBank said that those earning below RM5,000 will benefit the most from any cash stimulus such as cash handouts, but admitted that the current policies, such as the 1Malaysia People’s Handout (BR1M) handouts, have not been effective.

“We believe a one-off payment or two staggered payments may not yield the desired results unless the cash payments are large or they are paid on a monthly basis,” said the report.

AmBank also criticised any handouts towards those who earn more than RM5,000, since they will most likely save the cash or use it to pay debts off instead of spending it.

Last month, Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah said the government plans to implement distribution of the BR1M twice yearly from 2014.

He also said the government is looking to implement the best assistance models for households with income between RM4,000 and RM5,000.

He said the increased distribution of the BRIM this time will enable recipients to use it within a specified time and in a more careful manner compared to a one-off hand out.

Prime Minister and Finance Minister I Datuk Seri Najib Razak has said his administration will announce measures to ease the burden on the lower and middle-income group in the 2014 Budget to be presented in Parliament next week, including the possibility of increasing payments on the BR1M from the present RM500.

Research firm Maybank Investment Bank had predicted last month that gas and electricity subsidies are likely to be next, while Domestic Trade and Consumer Affairs Datuk Hasan Malek hinted that Putrajaya may slash subsidies for flour and sugar in Budget 2014.

This comes as Asian Deveopment Bank predicted last week that Malaysia’s inflation rate will increase to 2.2 per cent following a revised outlook of gross domestic product (GDP) growth at 5.0 per cent in 2014.

Putrajaya has stated that it aims to reduce the budget deficit to 4 per cent this year and gradually to 3 per cent by 2015.