Middle Class Squeezed, Government Urged to Be More Sensitive to Purchasing Power

The middle class is considered to be increasingly squeezed by rising interest rates and the escalating cost of living. This condition has the potential to weaken public purchasing power whilst simultaneously eroding the role of the middle class as the main pillar of national consumption. Economist and Public Policy Expert from UPN Veteran Jakarta, Achmad Nur Hidayat, assesses that macro-stability-oriented economic policies must still consider their impact on middle-class households, who have long been the primary drivers of the domestic economy. According to Achmad, the increase in the benchmark interest rate and rising energy prices are exerting double pressure on this group. The impact is felt not only through higher credit costs but also through increased daily expenditure related to mobility and household needs. Achmad noted that the middle class makes a significant contribution to national consumption. Therefore, a weakening of this group’s purchasing power could have a direct impact on overall economic growth. Achmad highlighted data showing the number of middle-class Indonesians has declined in recent years. In his view, this condition is a signal that more people are vulnerable to a decline in their level of welfare due to economic pressure. He explained that the rise in interest rates aimed at maintaining exchange rate stability does have a strong economic basis. However, the transmission of that policy will ultimately affect bank lending rates, including home ownership loans, vehicle loans, and small business financing. Beyond the interest rate factor, Achmad also highlighted the impact of rising non-subsidised fuel prices on household spending. According to him, the fuel price increase not only affects transport costs but can also drive up the prices of various goods and services through a chain effect on distribution and logistics costs. He therefore urged the government to be more sensitive to the conditions of the middle class when formulating economic policies. This includes strengthening social protection that targets not only the poor but also vulnerable communities and the lower middle class affected by the rising cost of living. Furthermore, the government is encouraged to accelerate the development of affordable public transport to reduce public dependence on private vehicles, particularly in urban fringe areas.