Will people spend more if the GST is cut?
Say a poor family that spends about $2000 or less a month and saves little or nothing. If the GST is reduced by 2%, the family can buy a bit more with the $2000 or it spends less on the same amount of things and save about $40.
Or say another family that spends about $4000 pm and saves $200. If the GST is reduced, probably it will still spend $4000 but I don’t think it will spend more by using the money budgeted for saving.
Also people in the lower-income group might spend more if they are thinking of buying a costly item. But this is not something that happens frequently.
If you take a rich family that spends $8000 or more. The rich is not bothered by GST. If the GST is reduced, it will continue its normal lifestyle. Since prices are lower, it will spend less than $8000.
So I don’t think cutting the GST will encourage people to spend more. Instead the Government will collect much less revenue from the rich, the amount of which can be used to help the poor.
