Canada’s Economic Health
On December 16 the Liberal Government issued Canada’s Fiscal Update – the report card on the health of Canada’s economy. According to the Finance Minister, Canada’s economy is ”strong and growing with some challenges”. But the facts about Canada’s economy call into question the use of “strong and growing” as descriptors. However, what should be of greater concern to Canadians are the approaches that are being employed to address the “challenges”. They may leave Canada even more financially at risk in the long term. So, what can Canadians do? Perhaps, we must look past the rhetoric and have an honest and difficult conversation about our economic priorities.
First, we must consider the facts. Recent statistics indicate that Canadians are increasingly financially insecure. Household debt in Canada is at the highest levels on record. Over 13% of Canadians unable to pay their monthly credit card bills. October had the highest number of personal bankruptcies since the global financial crisis and 27% more working Canadians are turning to food banks to put food on their table. Almost half of all Canadians are within $200 of not being able to make ends meet each month. Add to that, jobs in all sectors are leaving Canada. Industry job loss examples include: aerospace – 3,000 workers (Bombardier), transportation – 1,600 workers (CN Rail), automotive – 2,600 workers (GM Oshawa), and oil and gas sector over 100,000 jobs. Just last month, over 71,000 jobs were lost across the country.
What does this tell us? Canada’s productivity and competitiveness are eroding and investors are choosing to put their money elsewhere. Foreign capital has fallen by 56% since 2015 and since 2017 over $100 Billion of investment into Canada’s energy sector has been cancelled.
Second, we must dispel the assumption that Canada’s economic challenges are a reflection of a global situation. In fact, the declining state of Canada’s economy appears to be unique to Canada. Our economic performance is falling behind other G7 countries. Canada’s unemployment rate is worse than Japan, Germany, the United States, and the United Kingdom. Canada continues to lose jobs while job numbers in the US continue to increase. Canada’s GDP growth is dramatically lower than the US, and Canada’s GDP decreased by 0.1% in October, while the US GDP grew by 0.5%.
All of this indicates that Canada’s economy is neither “strong” nor “growing.” In fact, Economists state that Canada is at the beginning of a significant economic slow down.
The Liberal government’s response to these challenges is to increase direct government spending toward targeted individual households predominantly through an increase in the personal tax deduction and a number of specialized social benefit programs. While, this may have a positive effect in the short term by helping a few struggling Canadians make ends meet, it is not sustainable in the long term. This approach fails to address the underlying fundamentals that are holding our economy back such as an over burdensome tax and regulatory environment, lack of infrastructure to transport goods to market, weak competitiveness (further weakened by interprovincial barriers) and a lack of foreign capital investment. Without creating the conditions where companies will choose to create jobs, grow and invest in Canada, the federal government is merely delaying a more severe financial situation rather than avoiding it.
Furthermore, the dramatic increase in spending, with Canada’s deficit forecasted to reach $27 BILLION next year alone, results in an unsustainable house of cards, resulting in higher annual debt servicing charges over a longer period of time. We, as Canadians, must be honest with ourselves and recognize that this debt is a reality that makes us vulnerable and severely limits our opportunities today and for the next generation.
The federal government has a duty to Canadians to position Canada economically for the future. Now is not the time to ignore our economic foundational industries. We must leverage our natural resources, agriculture and manufacturing industries by supporting their renewal and re-investment. This can only be accomplished by being brave enough to take on the complex and perhaps unpopular challenges of comprehensive tax and regulatory reform, investing in innovation and “green” solutions, and large nation building infrastructure programs. Only then will Canada once again be an attractive place for Canadians and the world to invest.
Article originally published in The Auroran