The economist was commenting on reports that Moody’s Investors Service was concerned over the level of household debt despite a decrease in household credit risk from 2016 to 2017.

“The question that needs to be asked is: why is household debt high? People are either spending more than they can afford or income levels are low compared to the cost of living,” he told FMT.

He said the net result was that people had to borrow in order to survive, taking loans for overpriced cars, expensive homes and credit card bills.

Malaysia’s middle class is highly leveraged, he said, and most of their income goes towards paying off their debts.

“If a financial crisis or a recession were to hit the country, and people can’t pay off their debts, banks would be in trouble.”

To help address this problem, Santiago said, wages needed to go up and the cost of living needed to be brought down.

Meanwhile, PKR’s Wong Chen said the dip in household debt levels was encouraging.

He said the drop could be due to higher GDP numbers and a lower demand for property.

“What I would like to see is household debt decreasing to 75% of the GDP through lower costs of living.

“Pakatan Harapan plans to do this by bringing down the cost of homes and cars.”

Financial planner Robert Foo meanwhile urged the public to come up with long-term plans to better manage their finances.

“Map out your source of income and work out how sustainable your income will be due to the changing nature of jobs, including digitisation and automation. Keep track of your spending and work out your priorities.

“You just can’t afford to wing it. There are people who earn big bucks today, but find themselves out of work due to retrenchments or industries going through bad times.”