Deputy Prime Minister and Minister of Finance Chrystia Freeland takes part in a press conference in Ottawa on Oct. 17.Sean Kilpatrick/The Canadian Press
The Business Council of Canada is urging Finance Minister Chrystia Freeland to avoid new spending in the fall economic update and to set a clear fiscal anchor focused onmanaging the growing cost of servicing debt.
Council president and chief executive officer Goldy Hyder sent a letter this week to Ms. Freeland, who is also Deputy Prime Minister, addressing the business community’s priorities ahead of the minister’s next update.
He pointed out that the yield on the 10-year Government of Canada bond is now hovering around 4 per cent, up from 2.8 per cent six months ago, meaning the cost of servicing federal deficits and debt has risen substantially.
“With long-term interest rates at the highest they have been in years, it is irresponsible to suggest that economic growth will be higher than interest rates for years to come. Governments can no longer run permanent large deficits without fear. The era of low interest is no longer with us, and that is a reality the government must address,” Mr. Hyder wrote.
The date for the fall economic and fiscal update has not yet been announced, but it is typically released in November. Ms. Freeland is scheduled to meet with private-sector economists later this week to hear their suggestions.
The Finance Department has long relied on an average forecast of key metrics such as GDP growth and inflation from private-sector economists as the foundation of its budget and fiscal update forecasts.
Mr. Hyder said that in light of higher borrowing costs, the fiscal update should avoid announcing permanent new spending funded through deficits. The government has indicated it is looking at options for new spending on housing and national pharmacare. The NDP has said that action on pharmacare is a “red line” in its working agreement with the Liberals to keep the minority government in power.
“As valuable and important as the contemplated measures may be, funding them with borrowed money is ill-advised and will only exacerbate the precarity of our public finances,” wrote Mr. Hyder, who will expand on these issues Wednesday in a lunch-hour speech to the the Canadian Club Toronto.
The business council’s letter says the government should introduce a new fiscal anchor in which it would ensure debt servicing costs do not exceed a maximum of 10 per cent of revenue, a metric known as the debt service ratio. A fiscal anchor is a target that guides the government’s overall spending plan.
Ms. Freeland’s current fiscal anchor is to keep the debt-to-GDP ratio on a declining trend. However Parliamentary Budget Officer Yves Giroux has expressed concern that the government has allowed short-term deviations in that trend.
The PBO report released a report last week that said the debt-to-GDP ratio will rise to 42.6 per cent in the current 2023-24 fiscal year, from 42 per cent last year. It also said the debt service ratio will peak at 12 per cent in 2023-24 and then decline gradually to 11 per cent in 2028-29.
The PBO said the federal deficit is on pace to exceed $46-billion this fiscal year, which is $6-billion more than projected in Ms. Freeland’s March budget.
The direction of Ottawa’s fiscal policy was the focus of a day-long debate Tuesday on the floor of the House of Commons.
Conservative Leader Pierre Poilievre used a designated opposition day to trigger a debate on federal fiscal policy, with a motion calling on the government “to introduce a fiscal plan that includes a pathway back to balanced budgets, in order to decrease inflation and interest rates.” The motion also calls for the plan to be introduced before the Bank of Canada’s next interest rate decision on Oct. 25.
“The reality is that when we spend what we do not have, we drive up the cost for everyone else,” said Mr. Poilievre in his opening speech, which referenced the recent PBO report findings. “One would think the government would reverse its policies, but it is doing the opposite.”
Statistics Canada announced Tuesday that Canada’s inflation rate dipped to 3.8 per cent in September, down from 4 per cent in August. Economists were expecting the rate to remain at 4 per cent. The rate is still above the Bank of Canada’s 2-per-cent target.
Liberal MPs who spoke during the debate highlighted the fact that inflation is coming down and pointed to various recent government announcements aimed at addressing cost-of-living concerns.
At a news conference Tuesday to announce additional consumer measures, Ms. Freeland said Canada’s fiscal record compares favourably to those of its international peers.
“We recognize that fiscal responsibility is important for Canadians. I think, culturally, it’s something we care about maybe more than people in other countries,” she said.
The Bloc Québécois criticized the Conservative motion and its tight timeline, saying it is not credible that inflation can be addressed within the next few days.
NDP finance critic Daniel Blaikie said that while aiming for a balanced budget “is not a bad thing,” the Conservative motion is not serious.
“Canadians are experiencing pain, but to pretend that somehow deficits derived from payments so that kids can get their teeth fixed is causing inflation in the housing market is either stupid or dishonest,” he said.
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.
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