The recently announced restrained cost of living wage increment for 2015 should help to stabilise Malta’s economy.

Low inflation encourages business, in particular tourism and industry, two main pillars of the economy.

This stability will induce foreign companies to retain their operations in Malta and may act as a catalyst to attract new foreign investment.

However, this increase will affect different people in different ways. Families who have diligently invested their lifetime savings in relatively secure financial instruments, such as Malta Government Stocks and local private company bonds, have, over the last five years or so, seen the return on their investments steadily decline and their planned and projected supplement to their earnings or pensions depleted by around 30 per cent.

The interest on a mix of MGS and local bonds has, in not that many years, dropped from a conservative mean of 6.5 per cent to 4.5 per cent. The last MGS issue had a coupon of just over four per cent.

This means that a couple who saved and invested €100,000 have, in the last years, seen their income drop by €2,000 per annum, or €38 per week. A pension increase of €0.58 a week will not do much for these people and will surely negatively affect their lifestyle. This realistic scenario should be considered in the forthcoming Budget. One relief could be a revision of taxation on interest.