Chapter 1 – Key Macro-Economic Trends: Summary
1.1 A High Growth Economy
The Canadian economy has experienced a sustained period of strong economic growth since emerging from a recession in the early 1990s. This strong economic growth has produced a very healthy labour market and has translated, on average, into substantial gains in consumers' disposable income. However, a closer look at the data reveals that the recovery in income was led by affluent Canadians (who “drove up the average”), while other consumers have fared less well. The marketplace has adapted to the unique needs of a financially diverse group of consumers, raising different issues across the income scale. Compared to the mid-1980s, consumer spending has shifted away from goods towards services. This shift is associated with the need for consumers to have sufficient time and literacy skills to effectively participate in a more complex, information-based marketplace.
Research opportunities include analysis of business responses to income polarization, particularly with respect to the various risks and choices facing consumers. The growing importance of services in the consumer marketplace also merits research attention, as problems with services consistently rate among the top consumer complaints.
1.2 Canada's Low Inflation Economy
Canada has experienced a sustained period of low inflation and low interest rates. Consumers managing a budget on fixed incomes have particularly benefited from Canada's low inflation environment. Low interest rates have significantly reduced the costs associated with borrowing, which is reflected in a debt-to-income ratio exceeding 100 percent and an historically low saving rate.
Research opportunities include exploring how vulnerable consumers would be to a sudden rise in interest rates. In particular, research could focus on the potential impact of higher rates on both the residential mortgage and short-term consumer credit markets, and on retirement incomes.
1.3 Regulatory Reform of Monopolies and Oligopolies
In the last two decades, there has been a trend towards regulatory reform in monopoly and oligopoly markets. Regulatory reforms have increased consumer choice, and in many cases have also lowered costs for Canadians. However, new information-processing demands have been placed on consumers. Questions have been raised about the ability of consumers to voice their concerns in newly competitive marketplaces.
Research opportunities include the need to gather good data on the impact of these reforms on consumers, such as their impact on prices and the entry of viable competitors. Information will likely also be required on service quality and innovation, affordability, and the ability of consumers to understand and navigate these new markets, and to access redress.
1.4 A More Open Domestic Marketplace
Trade – particularly North American trade – has expanded, and is crucial to Canada's economy. It offers a number of potential benefits to Canadian consumers, including a more diversified supply of products. Ongoing international trade negotiations, however, are now touching on consumer issues; for example, on how to appropriately harmonize existing consumer protection frameworks.
The complexity of trade agreements poses challenges to the non-governmental consumer advocacy sector, and to interested individual consumers, because their resources are often too limited to undertake in-depth analysis.
Research opportunities include addressing the gaps/constraints with respect to data on consumers and trade, and exploring analytical methodologies that would allow for a better understanding of trade information from a consumer perspective. Little information is available on the relationship between merchandise imports and the scope and nature of choice for Canadian consumers, nor is there much information on the impact of imports on prices. In-depth case studies in newly open consumer service sectors may also be required, as there is little analysis currently available on the impact on consumers of new suppliers entering domestic markets.
1.5 A Marketplace Transformed by Technology
Technological change – by its pace and scope – is transforming the marketplace. Technology has increased consumer choice, both in the form of entirely new products and services and in terms of a more diverse price/quality mix. But the challenge of keeping up with new technological applications and product information is affecting consumers' ability to navigate the marketplace. Rapid product turnover raises consumer issues such as the trouble and expense of upgrades, the risks borne by early adopters, and the potential for confusion – and costs – related to competing standards. The scope of technological change (e.g. digital revolution) is also raising a number of issues with respect to the traditional consumer protection framework.
Research opportunities include analyzing the consequences of the pace of technological change; assessing the costs to consumers against the value of new product versions; and assessing consumers' technological literacy. It will also be important to ensure that the consumer perspective is well understood as complex regulatory frameworks are brought in line with technological changes.