For the last decade or more, B.C. enjoyed bragging rights for its economic performance relative to other parts of Canada. The province generally outperformed its counterparts, often leading the country in job, population and GDP growth.
From 2010 to 2018, B.C.’s GDP grew at nearly twice the pace of growth registered among Canada’s other provinces, the Fraser Institute noted in 2020.
But more recently, the wind has come out of B.C.’s economic sails. And this economic cooling is occurring at a time when both B.C.’s population and public sector continue to grow.
“Real GDP, or real income per person, is going down because our population is increasing by 2.5 or three per cent a year [and] economic growth is going to come under one per cent,” said Jock Finlayson, senior economist for the Independent Contractors and Business Association (ICBA).
“So I would expect that real GDP, or real income per person, will be negative. It was negative last year. And I think we’re looking at two more years where we’ll continue to see declines in GDP per person. By the way, that’s true for Canada as well – it’s not just British Columbia.”
“We’re in an environment of low growth, where British Columbia will be akin to Ontario in last place for economic growth across Canada,” said Bridgitte Anderson, CEO of the Greater Vancouver Board of Trade (GVBOT). “In an environment where we’ve got low growth and high costs, we are somewhat concerned about what the next year or two will bring.”
GDP for B.C. – and for economies around the world – fell off of a cliff in 2020 due to the economic impact of the COVID-19 pandemic. It then came roaring back in 2021 with growth of 6.2 per cent. In 2022, B.C. GDP posted 3.8 per cent growth.
But inflation followed by higher interest rates cooled the economy in 2023, and the province’s Economic Forecast Council expects growth to come in at under one per cent for the year.
In 2024, B.C.’s economy could nearly flatline. Projections have real GDP growth at between just 0.3 to 0.7 per cent, which is on par with estimates for Ontario and Quebec, but below the expected growth rates for Alberta, Saskatchewan and Manitoba. This low growth will mean B.C. Finance Minister Katrine Conroy will have less tax revenue to work with in Budget 2024.
“For the last several years, most or all of the job growth has been in the public sector,” Anderson noted. “And while some of that is understandable, because there has been a lot of job growth in the health-care system, for example, it is the private sector that is the economic engine of this province.”
Since 2019, there has been 20 per cent growth in public sector jobs in B.C., Finlayson said, while private sector payroll jobs have increased by just two per cent.
“The private sector is really struggling, and I’d like to see in the budget a frank acknowledgement of that, and a recognition that it’s time for a pivot away from a public sector-driven economic agenda for the province to one that recognizes that we are primarily a market economy,” Finlayson said.
The B.C. government has been spending more than it takes in. While business leaders consider much of the capital spending to be good debt that helps finance the things that a growing province needs – hospitals, housing, bridges and public transit – over-spending on the operational side is becoming harder to justify, given the rising cost of borrowing and debt servicing.
It is now costing the B.C. government $275 million per month to service its debt, said Carson Binda, B.C. director for the Taxpayers Federation of Canada.
“This year alone, over the last fiscal year, we saw a 10-per-cent increase in provincial government spending,” Binda said.
“Inflation rose by about three per cent. Population also grew by about three per cent. So that increase in government spending is far outpacing either the rate of inflation or provincial population growth.”
Ken Peacock, chief economist for the Business Council of BC (BCBC), said the B.C. government needs to start reining in spending.
“We’re quite concerned that we’ve moved to the situation of a structural deficit,” he said. “That suggests that even in strong times they’re running a deficit. That’s problematic.
“It’s unlikely that they’ll balance the budget, but we’ll be looking for some sort of fiscal anchor plan to get back to a balanced budget, over several years perhaps.”
Business groups don’t want to see the budget balanced through higher taxes. Instead, they would rather see balance through spending discipline. They are also pressing for tax relief.
Last year, GVBOT produced a report that showed the B.C. government had imposed $6.5 billion in additional government costs on the private sector in just two years.
The lion’s share of that comes from the employer health tax (EHT) that replaced the Medical Services Plan in 2019. The EHT costs employers $4 billion a year, according to GVBOT’s Counting the Costs report. Another $1.2 billion is paid in mandatory paid sick leave. The carbon tax added $500 million.
Employers with payrolls of at least $500,000 must pay the EHT. GVBOT and other business organizations, including the Canadian Federation of Independent Business (CFIB) want the B.C. government to raise the threshold to $1.5 million.
“It’s one thing that would provide a lot of relief to a lot of businesses, particularly small and medium businesses across a broad sector,” Anderson said.
CFIB policy analyst Emily Boston said the CFIB has three main budget “asks” from the provincial government, and increasing the threshold for the EHT is one. The CFIB also wants to see some general tax relief, as well as a rebate for employers who pay WorkSafeBC premiums. WorksafeBC currently has a $2.5 billion surplus, Boston said.
“Our key ask is to issue a rebate to employers,” she said. “It’s at a point where it’s 146 per cent funded.”
Many businesses are feeling the pinch from carbon taxes, which will increase on April 1 to $80 per tonne from $65 per tonne. That will push the cost of gasoline to $0.17 per litre from $0.14 cents per litre, and diesel from $0.16 to $0.20 per litre.
Business leaders don’t expect to see the current NDP government cut or pause the carbon tax. But they say they would like to see the motor fuel tax scrapped.
When the carbon tax was introduced in 2008, it was revenue neutral. Offsetting carbon taxes with an eliminated or lowered motor fuel tax might bring the carbon tax back to, or closer to, revenue neutrality.
“We have been saying to the government, now is the time to look at that [revenue-neutral] model again,” Anderson said.
The next provincial budget will be tabled on Feb. 22.
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.
