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BMO Financial Group

January 12, 2011 09:44 ET

Tax Relief to Boost Disposable Income in New Brunswick, Says BMO Economics

FREDERICTON, NEW BRUNSWICK--(Marketwire - Jan. 12, 2011) - Economic growth in New Brunswick is set to slow after advancing an estimated 2.5 per cent in 2010, but lower income taxes will provide some stimulus for consumer spending, according to the Provincial Monitor report issued today by BMO Capital Markets Economics. 

"With downshifting fiscal stimulus and the strong Canadian dollar offsetting tax relief, New Brunswick's growth will be limited to little more than 2 per cent in 2011," according to Robert Kavcic, Economist, BMO Capital Markets.

While some major private-sector capital projects have wound down, government capital investment is also poised to slow after providing a major support during the recession. Total capital spending by the Province is pegged at $593 million in fiscal 2011/2012, down from $940 million in fiscal 2010/2011 when the stimulus program was still in force.

"The Canadian dollar is expected to hold around parity in 2011, meaning our exporters and manufacturers will see less growth," said Christine Cooper, District Vice-President, New Brunswick and PEI, BMO Bank of Montreal. "We hope that New Brunswick businesses take advantage of the high dollar to invest in their operations to improve productivity."

"The ongoing implementation of the plan to lower personal income taxes will add further to disposable income in the coming year, before being fully implemented in 2012," noted Mr. Kavcic. "Still, consumer confidence will be nagged by a jobless rate that rose above 10 per cent in recent months, the highest level since late-2005."

The Province of New Brunswick is projecting an $820 million budget deficit in fiscal 2010/2011, a deterioration from the $749 million budget projection. This shortfall clocks in at about 2.9 per cent of GDP – the deepest fiscal hole in Atlantic Canada.

The complete report can be found at www.bmocm.com/economics.

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