Ch 6
http://www.canada.com/windsorstar/story.html?id=d86a1aec-de4f-4eb5-835a-0f2fdaa15dd3&k=72787
This article is from April a year ago, so it’s not completely current. However, it is a very good example of how important consumer spending is to the GDP. It begins its argument that consumer spending will increase with evidence of two tax cuts: one by the Liberals before the election, and one promised by the Conservatives (GST) after. These two events should fuel our “national economic growth,” and therefore, our GDP.
This article also predicts increases in wages and in full-time employment along with stating that people in Alberta will be receiving $400-cheques from their government. It goes on to say that these three things will add over a billion dollars into the real disposable income for 2006.
All of this would contribute to the “wealth effect.” With more money in their pockets, consumers will naturally want to spend more. What happens when we spend more? The economy improves!
Real after-tax income should increase by about five percent in 2006, which is double the recent trend in the last few years. Forecasts of a higher wages and increased business investment should balance out other not-so-great areas such as slumping trade and result in an economic growth of almost three percent (after inflation). Along with all these positives, something else will escalate as well: consumer spending. Predicted to go up by about three and a half percent, this should provide another boost to the economy.
However, there are a couple of negatives expressed in this article. One is the rollback of income tax that the Liberals intend to implement that will cost consumers over four billion dollars, leading to probably a decrease in spending. Not good. Two is that even with an impressive revenue growth, the Canadian government still can’t afford to have both income tax and the GST cuts. Lastly, the Canadian dollar’s increase in value (against the American dollar) will come at a cost to our exports.
So, the bottom line?
Spending = GOOD
http://www.canada.com/windsorstar/story.html?id=d86a1aec-de4f-4eb5-835a-0f2fdaa15dd3&k=72787
This article is from April a year ago, so it’s not completely current. However, it is a very good example of how important consumer spending is to the GDP. It begins its argument that consumer spending will increase with evidence of two tax cuts: one by the Liberals before the election, and one promised by the Conservatives (GST) after. These two events should fuel our “national economic growth,” and therefore, our GDP.
This article also predicts increases in wages and in full-time employment along with stating that people in Alberta will be receiving $400-cheques from their government. It goes on to say that these three things will add over a billion dollars into the real disposable income for 2006.
All of this would contribute to the “wealth effect.” With more money in their pockets, consumers will naturally want to spend more. What happens when we spend more? The economy improves!
Real after-tax income should increase by about five percent in 2006, which is double the recent trend in the last few years. Forecasts of a higher wages and increased business investment should balance out other not-so-great areas such as slumping trade and result in an economic growth of almost three percent (after inflation). Along with all these positives, something else will escalate as well: consumer spending. Predicted to go up by about three and a half percent, this should provide another boost to the economy.
However, there are a couple of negatives expressed in this article. One is the rollback of income tax that the Liberals intend to implement that will cost consumers over four billion dollars, leading to probably a decrease in spending. Not good. Two is that even with an impressive revenue growth, the Canadian government still can’t afford to have both income tax and the GST cuts. Lastly, the Canadian dollar’s increase in value (against the American dollar) will come at a cost to our exports.
So, the bottom line?
Spending = GOOD
posted by Grace at
10:37 PM
1 Comments:
The increase in consumer spending is always something good to look forward to. The intial reaction of human nature when we hear of the provincial and federal government's decision to cut taxes is.. pure happiness of course. Who in their right mind would not want more money in their pocket? I fear that the public might be distorted from the truth. The cut in taxes would eventually lead up to a greater burden on the nation. Provincial and federal debts in the long run would not serve the commonwealth any good; the debts indirectly affects everyone. I think that tax cuts should be made progressively within the country, however, drastic measures might not the suitable idea.
By
professorwong, at 11:28 PM
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