Household Financial Strain in Malaysia: Investigating the Drivers of Elevated Cost of Living

Rising living costs in Malaysia impose significant financial burdens on households and challenge economic policymaking. This study identifies and quantifies the influence of six macroeconomic variables—Population Growth Rate, Tax Rate, Import Rate, Export Rate, Income Inequality, and Lending Interest Rate—from 1993 to 2023 on the country’s cost of living. Drawing on data from the Department of Statistics Malaysia (DOSM) and the World Bank, we apply descriptive statistics, correlation analysis, and multiple regression methods to uncover long?term relationships. Our findings indicate that population growth and income inequality are positively associated with increased living costs, while fluctuations in import/export rates and adjustments in tax and lending interest rates exert varying but significant effects. These results offer robust empirical evidence of complex interdependencies, underscoring the need for targeted policy strategies—such as equitably structured taxation, inclusive growth policies, trade balance stabilization, and prudent monetary regulation—to alleviate living cost pressures. By illuminating the macroeconomic drivers of living cost dynamics in Malaysia, this study provides actionable insights for policymakers to enhance household welfare.