Consumer purchasing power picks up in 1997. (Canada)(Frank Talk on the Economy)(Column)

The coming year promises to bring as much uncertainty as we've seen in 1996, and the sources of that uncertainty will remain much the same. First, there is the prospect of rising U.S. interest rates and the question of the extent to which Canada will have to over-compensate for these increases. Second, there is the impact of huge numbers of unemployed people who are hoping for jobs. The third source of uncertainty is a political cycle in which we face a federal election along with possible further problems on the constitutional front.

However, along with the uncertainty there is some good news. Ontario consumers will see the first large part of a tax cut starting in January. This should help boost consumer confidence and feed into increased consumer spending next year.

A Light on the Horizon?

Several times over the past year, Frank Talk has highlighted the difficulties facing consumers and explained why they would not be able to increase spending. During the year, consumers' debt loads continued to mount while savings rates remained at the rock-bottom level of about 6 per cent. People are trying to maintain their lifestyle by borrowing and cutting savings - not a good recipe for long-term peace of mind.

As I noted earlier, there is one bright light on the horizon for hard-pressed consumers. This is the large tax cut in Ontario that will start in January 1997. (A smaller first instalment came into effect in July 1996.) Since Ontario represents 40 per cent of Canada's economy, what …