PAUL YOUNG, CPA, CGADECEMBER 10, 2016

Understanding Economic Growth and the role of Millennials on spending in Canada

This presentation is to help assist millennials as well as others with understanding that a strong economy drives business investment and job creation.

Description

GDP Growth and Millennials

GDP by Expenditure

Housing

Education/Job Market

Government Deficit/Debt – Canada

Agenda

GDP Growth

Source: Scotiabank, Cheatsheet.com, Investopedia and Stats Canada

What does GDP Growth mean?The gross domestic product (GDP) is one of the primary indicators used to gauge the health of a country's economy. It represents the total dollar value of all goods and services produced over a specific time period; you can think of it as the size of the economy.

How Do Millennials spend money:• Millennials spent an average of $26,000 a year on discretionary

purchases, such as eating out and travel. This is $6,000 less per year than the average consumer.

• Millennials tend to use cash, a debit card and checks for half of their monthly spending and charge just 30% of their purchases.

• Millennials love their coffee. The only category where millennials spent more money than Generation X and baby boomers is on coffee and fast food.

GDP by Expenditure

Source: Stats Canada and http://www.environicsanalytics.ca/

• Part-time jobs do not have benefits• Most millennials are doing jobs not necessarily

related to their field of studies• Many millennials still live at home due to housing

costs and student debt• Household spending drives the economy

Housing

Source – Scotiabank, BMO, CMHC and RBC

Comments:• You need earn

over 100K+ to be able to afford a home

• Condos can be cheaper, but come with costs, i.e. maintenance fees

• Apartment rent can vary from $850 to $1,200 a month

Graduates

Commentary:• Canada is producing 500K to 516K grads per year as

compare to the job market which is only creating 200K in new jobs

• Declining enrolment is impacting education• Healthcare cutbacks are forcing the elimination of

healthcare jobs• Canada is export driven economy. Exports need to

expand to new markets. For each $1B in exports is 5,500 jobs

• Retail Channel is evolving to more eCommerce.• There is a skills gap. Education has not align to jobs

in areas like advance manufacturing, Cybersecurity, Analytics, Expert Farming, etc

•

Debt/Deficits on the millennials

Comment:• Approximately 1/3 of income is taxes• Today’s debt and deficits are

tomorrow taxes• Government is imposing CPP hikes

which will reduced your after tax income.

• Carbon Taxation will impact millennials as they eat out and travel more as part of their spending

• Largest growing segment as such will be impacted more by taxation increases and/or spending cuts

• Many companies as well as government are moving away from defined benefit pensions to defined contribution – FYI no guarantee pension benefit will be the new norm.

Summary / Deficits

Healthcare and education make up about 70% of the provincial budget

Paul Martin left $13B surplus when he left office, but social programs were underfunded.

Stephen Harper had three surpluses during his time in Office

Stephen Harper increase spending to support the stimulus that was demanded by the opposition parties as part of the minority government

You cannot go from $55B deficit to zero in one year. The private sector has to pickup the slack. Stephen Harper gradually pull back spending as part of managing the fiscal management cycle. In the last year of Stephen Harper’s mandate there was $1.9B surplus

Trudeau government has no plan to balance the budget. Modest deficits have gone out the door

Trudeau plans of lowering middle class taxes and increasing the family tax benefit have had little influence on the economy. In fact the actual family tax benefit is only about $7 more month compare to old plan.

Provincial policies like hydro rates are countering the tax cuts and family tax benefits

We are in for periods of slow growth. There are demographics in play as well as high household debt

Financial StatementStatement of Deficit

Source – Government of Canada

Comments: There has been many comments on the federal government, especially debt and deficit. Mr. Harper took over as official government on February

5, 2006. The house was in a minority parliament as Paul Martin just left office. The CPC first annual report was 2006-2007 - http://www.parl.gc.ca/parlinfo/Compilations/FederalGovernment/PrimeMinisters/Gallery.aspx

Harper took a hard look at funding social programs starting in 2007-2008 (link: http://www.fin.gc.ca/afr-rfa/2008/afr2008_e.pdf) – see page 13

USA economy growth rates on average are 2% as compare to 4% in the 1990s. http://www.statista.com/statistics/188165/annual-gdp-growth-of-the-united-states-since-1990/. LPC comments that Harper has been poor manager of the economy and yet nothing on USA Growth rates. USA still has not totally recover from housing bubble or stagnation with the middle class: http://www.cnbc.com/id/102438557. USA is Trade has been rebounding, but the problem is the lack of capacity for exports in key provinces like Ontario and PQ: http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/gblec02a-eng.htm

2008-2009 there was world-wide global recession which forced Harper and his government to spend on a stimulus. Both the LPC and NDP claim the stimulus was not enough it terms of helping the economy: http://www.thestar.com/business/2009/02/06/stimulus_not_enough_liberals.html. It is funny how Mr. Goodale recently made posts that CPC had been poor on managing the finances, but says little on how LPC asked for more money

Mr. Harper increases transfers to the provinces by 50% over the past 8+ years. The provinces have more money for education/healthcare than at any point of time in the past 20+ years. In the 1990s the LPC cut transfers to the provinces, but nothing is said, why? http://www.slideshare.net/paulyoungcga/canada-deficit or http://www.slideshare.net/paulyoungcga/provincial-transfers-and-program-spending. The opposition parties like the LPC or NDP are good at saying healthcare will see $36B less in money, but say little how healthcare delivery by various provinces has gotten worst over the past 10+ years, why? The PBO report never look at delivery, but felt it is just a funding issue: http://www.bloomberg.com/visual-data/best-and-worst//most-efficient-health-care-2014-countries

Other Resources

Skills Gap - http://www.thewhig.com/2016/04/05/job-skills-gap-worsening-study-finds

Slow Economy - http://www.slideshare.net/paulyoungcga/gross-domestic-product-gdp-canada-july-2016

Wage Growth - http://www.slideshare.net/paulyoungcga/wages-and-employment-canada-july-2016

Housing Costs - http://www.slideshare.net/paulyoungcga/real-estate-trends-and-analysis-for-canada-august-2016

Youth Unemployment - http://debatepost.com/2016/09/14/canada-continues-importing-unskilled-immigrant-while-unemployment-rate-climbs-to-7/

Career Management/Innovation - http://www.slideshare.net/paulyoungcga/2016-employment-outlook-canada

Government Spending - http://www.slideshare.net/paulyoungcga/government-policies-healthcare-and-education-canada