Justin Trudeau’s Liberal government isn’t expected to change tack on fiscal policy when Finance Minister Chrystia Freeland delivers the fall economic statement on Tuesday, or in next spring’s budget.CHAD HIPOLITO/The Canadian Press
Inflation has become a chilling worry. The economy is recovering faster than expected. So will Justin Trudeau’s Liberal government change tack on fiscal policy and pull back on the $101-billion stimulus announced in its April budget? Or its $78-billion in election promises?
No.
It’s not in their political DNA.
This is a government that always talks about stimulating the economy, including the vulnerable in it, and having people’s backs with public funds – not about cooling off demand, pulling back, or tightening belts.
That won’t change dramatically when Finance Minister Chrystia Freeland delivers the fall economic statement on Tuesday. The Liberals aren’t planning a sea change in next spring’s budget, either.
Many economists argue Ms. Freeland should cut back a chunk of the stimulus package announced in April because of strong job and economic growth and inflation running at the highest rate in years. Don’t expect that.
The revenue and deficit projections in Tuesday’s statement will look presumably better than in April – inflation actually helps that in the short term – but don’t take that as the signal the Liberal government will shift gears to focus on balancing budgets.
That’s not the way they have done things in six years in power. When deficit projections come in better than previously forecast, as they often did, the Liberal government saw that as creating room to spend more.
On Tuesday, Ms. Freeland will be able to use lower deficit forecasts to argue there is room for additional spending – some now, in Tuesday’s economic statement, including more measures to deal with the COVID-19 pandemic, and more to come in next spring’s budget.
The Finance Minister will have to talk about inflation, but the Liberals have so far largely cast that as an issue of affordability, and argued that subsidized child care and measures aimed at alleviating high housing costs will ease the pain.
There is a political clamour – from left and right, as well as provincial and municipal administrations – for Ottawa to do something. So Ms. Freeland might signal action is coming on election promises to institute a house-flipping tax and curb foreign ownership of residential housing.
But the big picture, the plan to spend huge sums on a recovery plan and keep adding more, isn’t going to be hacked back.
There are plenty of people telling them they should, and not only their Conservative political opponents.
Economists have suggested the government should at least take their foot off the gas fuelling demand.
Robert Asselin, senior vice-president of the Business Council of Canada and former policy adviser to Ms. Freeland’s predecessor, Bill Morneau, recently penned an article arguing that the Liberals’ huge recovery spending should be rejigged because the economy is going strong and inflation is now the greater concern – he warned against “fiscal complacency.”
McGill University economist Chris Ragan said he didn’t think lopping $20-billion off the $100-billion recovery plan would have much of an impact on inflation, but there is still another reason to do it – because it would save $20-billion that is not needed for economic recovery.
The Liberals see that the other way around. If cutting back $20-billion won’t cool inflation, why do it? Inflation is still largely blamed on supply chain issues, and still forecast to be a problem that will ease in a year. They argue that many of the spending measures in their recovery plan are aimed either at green-economy transition or aiding vulnerable people who will need it more because of inflation, not less. Full speed ahead.
The Liberal approach to the national debt hasn’t really changed, either – even though it is now far higher than it was before the pandemic.
Before 2020, Mr. Trudeau’s Liberals argued there was room to spend because the ratio of the federal debt to the size of the economy, at roughly 30 per cent of GDP, was not increased significantly – so things were under control. After the massive pandemic deficits, the Liberals argue things will be fine because the debt ratio won’t go up in the future – only now, it is roughly 50 per cent of GDP.
They could, with better revenue figures, suddenly present a forecast for balancing the budget in coming years – disarming the Conservatives’ politically. But then they’d open themselves up to criticisms from the NDP that they are imposing austerity. And under Mr. Trudeau, the Liberals have leaned to competing with the NDP for voters. The Liberal approach to fiscal policy will still be the Liberal approach.
For subscribers: Get exclusive political news and analysis by signing up for the Politics Briefing.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
:format(jpeg)/cloudfront-us-east-1.images.arcpublishing.com/tgam/Q43QMYUVANJRNGIOSXHM7TFIPI.JPG)
