Taxes take up greatest part of household income By The Canadian Press VANCOUVER, B.C. – A prominent think-tank that’s often critical of government spending policies says Canadian families spend more than two-fifths of their total income on taxes.

The Fraser Institute says its annual Canadian Consumer Tax Index calculated that taxes ate up 41.7 per cent of the average family’s income in 2009.

That’s up from 1981 when taxes accounted for 40.8 per cent of a family’s income, or 33.5 per cent in 1961 when the Fraser Institute first compiled the index.

Interest rates must rise, but some analysts wonder what’s the hurry

By Julian Beltrame

OTTAWA — It’s a minority view, but some economists are advising the Bank of Canada to hold off on raising rates — for a long time.

The reason, says Carl Weinberg of U.S.-based High Frequency Economics, is that the Canadian economy is not nearly as strong as recent data suggests and inflation is at acceptable levels.

He says Canada’s central bank could easily keep interest rates at record lows until next year and not worry about inflation getting out of hand.

That flies in the face of the prevailing view of economists, who believe Bank of Canada governor Mark Carney will start raising rates in July — or possibly even in June.

Carney is expected to give a strong hint into his thinking this week, starting on Tuesday with a scheduled interest rate announcement.

No one thinks he will move this week on the policy rate, which is at an emergency level of 0.25 per cent, but the governor is expected to issue a new forecast on both growth and inflation that will tip off when he will act.

Carney made a conditional pledge last spring not to raise rates until the end of the second quarter of 2010 unless inflation becomes a worry.

That’s going to be a high hurdle for him to jump if he does intend to move early, says Michael Gregory of BMO Capital Markets.

“If they go before June, there’s only one reason if they wanted to maintain their credibility, and that’s the inflation projection has changed,” he said.

“But that’s sending a pretty sharp inflation warning and I’m not sure what’s on the ground now justifies ringing that alarm bell.”

Statistics Canada reported last month that the core inflation rate, which the Bank of Canada watches closely, was 2.1 per cent in February while overall inflation was 1.6 per cent.

Both are within the central bank’s target range for the annual inflation rate, set at between one and three per cent.

The Canadian Press