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Economy

Adam Zivo: Don’t let the Liberals fool you. The economy is doing worse than they say

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9 months ago

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Canada's economy is contracting.
Based on GDP figures, Canada’s economy contracted 1.1 per cent in the third quarter. But the country’s economic situation is much worse when per capita growth is considered, writes Adam Zivo. Photo by Getty Images / iStock

The latest GDP data from Statistics Canada shows that our economy shrank by 1.1 per cent in the third quarter of 2023. While this is already a sobering figure, the reality is much worse than many realize, as this data does not account for the fact that economic growth is being artificially inflated through high immigration.

Once you adjust for population growth, it’s clear that our standards of living are actually declining at an unprecedented rate, which the federal government seems happy to ignore. This problem will almost certainly continue until the public starts to understand the economy in per-capita terms and demands more accurate economic indicators from its political leaders.

This switch in mindset should not be difficult to make.

A country’s GDP is determined by how large and productive its population is. Imagine that you govern a village of 100 people where each individual produces $1 in economic value per year — the annual GDP of your village is thus $100.

If you want to increase your village’s GDP — let’s say to $150 — you need to either increase your population or improve the productivity of existing residents (or some combination of both).

Let’s say that you meet your growth target solely by improving productivity and that your village now has 100 people making $1.50 a year. This is a great outcome because your citizens have become 50 per cent richer.

Now let’s take the opposite and say that you rely solely on population growth to meet your GDP target, meaning that you now have 150 villagers producing $1 a year. This is a suboptimal but acceptable outcome, because while villagers aren’t getting richer, they also aren’t getting poorer.

But now let’s imagine that the population of your village doubles and inhabitants start making only $0.75 a year. While you still reach your target GDP of $150, each person in your village has actually gotten poorer.

Now imagine that you decide to ignore the impoverishment of your citizenry and instead narrowly focus on growing overall GDP by rapidly increasing the population, even if that comes at the expense of per capita income. That would be really bad, right? And it would miss really obvious points about the nature of economic growth, right?

Well, welcome to Canada.

We have a bad habit of inflating our economic successes by discounting the impacts of population growth. This problem isn’t unique to us — many countries promote overall GDP while playing down per-capita indicators — but the distortionary effects are greater in the Canadian context because our population has been increasing faster than those of most other developed countries.

For example, between 2011 and 2015, Canada and the United States enjoyed near identical annual real GDP growth rates (around 2.15 per cent) — but Canada’s population grew slightly faster than the United States’ (one per cent versus 0.85 per cent), which meant that Americans actually slightly outperformed us on a per capita basis.

Then the Trudeau government came into power and, through immigration, boosted our population growth rates to around 1.3 per cent. While this buoyed overall GDP, it concealed deepening economic stagnation.

In 2019, just before the pandemic, Canada’s real GDP grew by 1.9 per cent — which suggested that the economy was doing well and that growth had hardly slowed from the late Harper years. In fact, focusing exclusively on overall GDP during this period would have given the impression that Canada was a top performer among the G7 and was growing faster than France and Britain.

But much of this growth was a mirage caused by immigration. When looking at per-capita numbers, not only had Canada’s growth rates actually slowed by 50 per cent relative to the early 2010s, the country’s advantages over its peers generally disappeared.

So even before the pandemic, the Canadian economy was hiding its anemia behind an immigration boom.

 

But the situation truly blew up over the past year when our population growth rate spiked to an unprecedented 3.15 per cent. For context, Canada is now the ninth fastest-growing country in the world, ahead of most of sub-Saharan Africa and in close competition with Uganda.

For Canadians to experience increased living standards under these circumstances, our overall real GDP growth rate has to be greater than 3.15 per cent — but it doesn’t come close to that threshold. Even the optimistic economic forecasts from earlier this year, which estimated 1.4 real GDP growth in 2023, concealed a per capita economic contraction of roughly 1.85 per cent.

A recent report by the National Bank of Canada estimates that the 1.1 per cent real GDP contraction we saw this autumn actually amounts to a 4.4 per cent contraction in per capita terms — which the bank called “unprecedented outside a recession.”

This should call for a major rethink of our economic strategy, as well as a new approach to how we discuss our growth — which is why, for the past year, economic analysts have advocated that the federal government pay more attention to per capita growth.

Yet this advocacy has fallen on deaf ears. The Trudeau government remains fixated on creating the illusion of economic resiliency by boosting overall GDP at the expense of Canadians’ pocketbooks.

So now the onus now falls on everyone else to normalize per-capita indicators that show the true costs of our high-immigration, low-productivity growth model. Only then can the federal government’s con game become untenable.

 

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Economy

B.C.’s debt and deficit forecast to rise as the provincial election nears

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2 days ago

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September 10, 2024

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VICTORIA – British Columbia is forecasting a record budget deficit and a rising debt of almost $129 billion less than two weeks before the start of a provincial election campaign where economic stability and future progress are expected to be major issues.

Finance Minister Katrine Conroy, who has announced her retirement and will not seek re-election in the Oct. 19 vote, said Tuesday her final budget update as minister predicts a deficit of $8.9 billion, up $1.1 billion from a forecast she made earlier this year.

Conroy said she acknowledges “challenges” facing B.C., including three consecutive deficit budgets, but expected improved economic growth where the province will start to “turn a corner.”

The $8.9 billion deficit forecast for 2024-2025 is followed by annual deficit projections of $6.7 billion and $6.1 billion in 2026-2027, Conroy said at a news conference outlining the government’s first quarterly financial update.

Conroy said lower corporate income tax and natural resource revenues and the increased cost of fighting wildfires have had some of the largest impacts on the budget.

“I want to acknowledge the economic uncertainties,” she said. “While global inflation is showing signs of easing and we’ve seen cuts to the Bank of Canada interest rates, we know that the challenges are not over.”

Conroy said wildfire response costs are expected to total $886 million this year, more than $650 million higher than originally forecast.

Corporate income tax revenue is forecast to be $638 million lower as a result of federal government updates and natural resource revenues are down $299 million due to lower prices for natural gas, lumber and electricity, she said.

Debt-servicing costs are also forecast to be $344 million higher due to the larger debt balance, the current interest rate and accelerated borrowing to ensure services and capital projects are maintained through the province’s election period, said Conroy.

B.C.’s economic growth is expected to strengthen over the next three years, but the timing of a return to a balanced budget will fall to another minister, said Conroy, who was addressing what likely would be her last news conference as Minister of Finance.

The election is expected to be called on Sept. 21, with the vote set for Oct. 19.

“While we are a strong province, people are facing challenges,” she said. “We have never shied away from taking those challenges head on, because we want to keep British Columbians secure and help them build good lives now and for the long term. With the investments we’re making and the actions we’re taking to support people and build a stronger economy, we’ve started to turn a corner.”

Premier David Eby said before the fiscal forecast was released Tuesday that the New Democrat government remains committed to providing services and supports for people in British Columbia and cuts are not on his agenda.

Eby said people have been hurt by high interest costs and the province is facing budget pressures connected to low resource prices, high wildfire costs and struggling global economies.

The premier said that now is not the time to reduce supports and services for people.

Last month’s year-end report for the 2023-2024 budget saw the province post a budget deficit of $5.035 billion, down from the previous forecast of $5.9 billion.

Eby said he expects government financial priorities to become a major issue during the upcoming election, with the NDP pledging to continue to fund services and the B.C. Conservatives looking to make cuts.

This report by The Canadian Press was first published Sept. 10, 2024.

Note to readers: This is a corrected story. A previous version said the debt would be going up to more than $129 billion. In fact, it will be almost $129 billion.

The Canadian Press. All rights reserved.

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Economy

Mark Carney mum on carbon-tax advice, future in politics at Liberal retreat

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2 days ago

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September 10, 2024

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NANAIMO, B.C. – Former Bank of Canada governor Mark Carney says he’ll be advising the Liberal party to flip some the challenges posed by an increasingly divided and dangerous world into an economic opportunity for Canada.

But he won’t say what his specific advice will be on economic issues that are politically divisive in Canada, like the carbon tax.

He presented his vision for the Liberals’ economic policy at the party’s caucus retreat in Nanaimo, B.C. today, after he agreed to help the party prepare for the next election as chair of a Liberal task force on economic growth.

Carney has been touted as a possible leadership contender to replace Justin Trudeau, who has said he has tried to coax Carney into politics for years.

Carney says if the prime minister asks him to do something he will do it to the best of his ability, but won’t elaborate on whether the new adviser role could lead to him adding his name to a ballot in the next election.

Finance Minister Chrystia Freeland says she has been taking advice from Carney for years, and that his new position won’t infringe on her role.

This report by The Canadian Press was first published Sept. 10, 2024.

The Canadian Press. All rights reserved.

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Economy

Nova Scotia bill would kick-start offshore wind industry without approval from Ottawa

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2 days ago

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September 10, 2024

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HALIFAX – The Nova Scotia government has introduced a bill that would kick-start the province’s offshore wind industry without federal approval.

Natural Resources Minister Tory Rushton says amendments within a new omnibus bill introduced today will help ensure Nova Scotia meets its goal of launching a first call for offshore wind bids next year.

The province wants to offer project licences by 2030 to develop a total of five gigawatts of power from offshore wind.

Rushton says normally the province would wait for the federal government to adopt legislation establishing a wind industry off Canada’s East Coast, but that process has been “progressing slowly.”

Federal legislation that would enable the development of offshore wind farms in Nova Scotia and Newfoundland and Labrador has passed through the first and second reading in the Senate, and is currently under consideration in committee.

Rushton says the Nova Scotia bill mirrors the federal legislation and would prevent the province’s offshore wind industry from being held up in Ottawa.

This report by The Canadian Press was first published Sept. 10, 2024.

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