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Budget 2022: Booming economy feeds federal focus on growth with $31B in new spending – Castlegar News

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The federal Liberals have delivered a budget that looks to take advantage of a boom in economic growth that has padded federal books, and turn that extra spending space toward removing hurdles to long-term gains.

However, experts cautioned that while the budget recognizes the country needs to do more to boost future growth, it fails to provide a clear road map of how to achieve prosperity in the coming years.

The economic boom since late last year has heaped $85.5 billion in new spending room, of which the government plans $56.6 billion in gross spending by 2027 targeted at speeding the flow of goods through the country’s supply chains, boosting housing supply and jolting businesses out of an anemic period of investment.

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The new spending has increased the fiscal year’s deficit to $52.8 billion.

RELATED:Federal budget the first important moment for NDP-Liberal pact, says finance critic

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Finance Minister Chrystia Freeland framed the spending as a hedge against near-term economic uncertainty created by Russia’s unprovoked invasion of Ukraine and the sixth wave of the COVID-19 pandemic.

But she said the spending is aimed at the long-term as well to address structural issues within the national economy that could hold back growth.

“Canadians understand that post-COVID, our country needs a growth strategy,” Freeland said in an afternoon news conference ahead of the budget’s release.

“We need to pay down our COVID debts and in a very uncertain 21st century Canada really needs an economic plan that is going to allow us to increase our productivity to increase our economic growth.”

It’s why the government reprofiled $15 billion in planned spending for a new fund designed to lower business investment risk for research and new technologies, $3.8 billion over eight years for a critical minerals strategy, and $450 million over five years to unclog supply chains.

Dennis Darby, president of Canadian Manufacturers and Exporters, said welcomed those measures, but said the budget failed to address labour shortages: “This is a miss.”

The document also looks to spend money from budgets past by forcing provinces to allocate nearly $7.3 billion in outstanding infrastructure dollars by next March or risk losing the money. Timelines to spend the money have also been pushed back from 2027 to 2033.

The government’s budget admits to hurdles to Canada’s long-term growth prospects, though falls short of a detailed economic strategy, said Robert Asselin, senior vice-president of policy with the Business Council of Canada.

“They are admitting at least that stuff they have been doing is not working. That’s a great start,” he said. “But I think to their own admission, they’re still not sure on where to go next.”

Rebekah Young, Scotiabank’s director of fiscal and provincial economics, said some measures should drive higher growth potential over the medium-term, but noted the lack of details marked a “missed opportunity to set out a national vision for future prosperity over the long run.”

The budget forecasts 3.9 per cent economic growth this year but expects that to slow over the ensuing four years to average 2.9 per cent annual growth in real gross domestic product.

Inflation too is expected to fall from 3.9 per cent this year — an upward revision to December’s fiscal update — back toward the Bank of Canada’s target of two per cent next year. The hot pace of price increases was something the government kept in mind while crafting the budget, Freeland said.

Unemployment is expected to stay at a low of 5.5 per cent over the forecast horizon.

Economist Armine Yalnizyan, an Atkinson Fellow on the Future of Workers, said the budget was a missed opportunity to invest in health-care workers, for example, to keep workers from leaving the care economy that accounts for one-fifth of GDP.

“You can build the middle class of the next century,” she said. “But only if you decide you’re going to make every job a good job, and make sure there are people there to do that work.”

Total spending this fiscal year declines to $452.3 billion, including debt servicing costs, from the $497.9 billion in the preceding 12-month period as emergency pandemic aid measures end.

The Canadian Federation of Independent Business was disappointed supports for small firms were ending, and the Canadian Chamber of Commerce noted the absence of debt relief for businesses could undermine growth plans.

The budget forecasts the debt as a percentage of the economy will hit 45.1 per cent this year and then decline, even in a worst-case scenario envisioned in the document.

Randall Bartlett, senior director of Canadian economics at Desjardins, said the government has put some of its financial windfall into the bank for a rainy day given the uncertain environment, and held back on moving ahead with a handful of election promises in this budget.

“There will be some people who aren’t happy ultimately with the budget, I think, as a result, and maybe not understanding why they put that windfall aside, but I think it’s the prudent thing to do,” he said.

Missing from the spending outlook are measures like pharmacare promised as part of the Liberals’ deal with the NDP. Nor did the document pump out the full suite of Liberal campaign pledges.

Freeland said this was the first of four budgets the Liberals expect to deliver before the next federal election, which could happen in 2025 if the NDP prop up the government until then.

“Yes, we will do more things over the next three budgets,” she said. “We will, however, do those additional things, fulfil those further promises within an absolutely responsible fiscal framework.”

The government rolled out a tax on excess profits at banks and insurance companies the Finance Department expects to reel in $6.1 billion over five years to add revenues into the fiscal framework. The budget also warned the country’s top earners that the government plans to change their minimum tax rate, with details later this year.

The Liberals are also promising a spending review to find $6 billion in savings over five years. A progress report is promised for next year’s budget.

—Jordan Press, The Canadian Press

MORE ON THE BUDGET:

Budget 2022: Feds add measures to curb speculation as housing supply gets $10B boost

Budget 2022: Liberals devote $4.3 billion to Indigenous housing needs

Budget 2022: Plan makes good on dental care but offers little in new health spending

Budget 2022: Liberals rejig $15B toward new business investment fund

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Britain's economy went into recession last year, official figures confirm – The Globe and Mail

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People walk over London Bridge, in London, on Oct. 25, 2023.SUSANNAH IRELAND/Reuters

Britain’s economy entered a shallow recession last year, official figures confirmed on Thursday, leaving Prime Minister Rishi Sunak with a challenge to reassure voters that the economy is safe with him before an election expected later this year.

Gross domestic product shrank by 0.1 per cent in the third quarter and by 0.3 per cent in the fourth, unchanged from preliminary estimates, the Office for National Statistics (ONS) said on Thursday.

The figures will be disappointing for Mr. Sunak, who has been accused by the opposition Labour Party – far ahead in opinion polls – of overseeing “Rishi’s recession.”

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“The weak starting point for GDP this year means calendar-year growth in 2024 is likely to be limited to less than 1 per cent,” said Martin Beck, chief economic adviser at EY ITEM Club.

“However, an acceleration in momentum this year remains on the cards.”

Britain’s economy has shown signs of starting 2024 on a stronger footing, with monthly GDP growth of 0.2 per cent in January, and unofficial surveys suggesting growth continued in February and March.

Tax cuts announced by finance minister Jeremy Hunt and expectations of interest-rate cuts are likely to help the economy in 2024.

However, Britain remains one of the slowest countries to recover from the effects of the COVID-19 pandemic. At the end of last year, its economy was just 1 per cent bigger than in late 2019, with only Germany faring worse among Group of Seven nations.

The economy grew just 0.1 per cent in all of 2023, its weakest performance since 2009, excluding the peak-pandemic year of 2020.

GDP per person, which has not grown since early 2022, fell by 0.6 per cent in the fourth quarter and 0.7 per cent across 2023.

Sterling was little changed against the dollar and the euro after the data release.

The Bank of England (BOE) has said inflation is moving toward the point where it can start cutting rates. It expects the economy to grow by just 0.25 per cent this year, although official budget forecasters expect a 0.8-per-cent expansion.

BOE policy maker Jonathan Haskel said in an interview reported in Thursday’s Financial Times that rate cuts were “a long way off,” despite dropping his advocacy of a rise at last week’s meeting.

Thursday’s figures from the ONS also showed 0.7 per cent growth in households’ real disposable income, flat in the previous quarter.

Thomas Pugh, an economist at consulting firm RSM, said the increase could prompt consumers to increase their spending and support the economy.

“Consumer confidence has been improving gradually over the last year … as the impact of rising real wages filters through into people’s pockets, even though consumers remain cautious overall,” Mr. Pugh said.

Britain’s current account deficit totalled £21.18-billion ($36.21-billion) in the fourth quarter, slightly narrower than a forecast of £21.4-billion ($36.6-billion) shortfall in a Reuters poll of economists, and equivalent to 3.1 per cent of GDP, up from 2.7 per cent in the third quarter.

The underlying current account deficit, which strips out volatile trade in precious metals, expanded to 3.9 per cent of GDP.

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How will a shrinking population affect the global economy? – Al Jazeera English

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Falling fertility rates could bring about a transformational demographic shift over the next 25 years.

It has been described as a demographic catastrophe.

The Lancet medical journal warns that a majority of countries do not have a high enough fertility rate to sustain their population size by the end of the century.

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The rate of the decline is uneven, with some developing nations seeing a baby boom.

The shift could have far-reaching social and economic impacts.

Enormous population growth since the industrial revolution has put enormous pressure on the planet’s limited resources.

So, how does the drop in births affect the economy?

And regulators in the United States and the European Union crack down on tech monopolies.

The gender gap in tech narrows.

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John Ivison: Canada's economy desperately needs shock treatment after this Liberal government – National Post

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Lack of business investment is the main culprit. Canadians are digging holes with shovels while our competitors are buying excavators

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It speaks to the seriousness of the situation that the Bank of Canada is not so much taking the gloves off as slipping lead into them.

Senior deputy governor, Carolyn Rogers, came as close to wading into the political arena as any senior deputy governor of the central bank probably should in her speech in Halifax this week.

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But she was right to sound the alarm about a subject — Canada’s waning productivity — on which the federal government’s performance has been lacklustre at best.

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Productivity has fallen in six consecutive quarters and is now on a par with where it was seven years ago.

Lack of business investment is the main culprit.

In essence, Canadians are digging holes with shovels while many of our competitors are buying excavators.

“You’ve seen those signs that say, ‘in emergency, break glass.’ Well, it’s time to break the glass,” Rogers said.

She was explicit that government policy is partly to blame, pointing out that businesses need more certainty to invest with confidence. Government incentives and regulatory approaches that change year to year do not inspire confidence, she said.

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The government’s most recent contribution to the competitiveness file — Bill C-56, which made a number of competition-related changes — is a case in point. It was aimed at cracking down on “abusive practices” in the grocery industry that no one, including the bank in its own study, has been able to substantiate. Rather than encouraging investment, it added a political actor — the minister of industry — to the market review process. The Business Council of Canada called the move “capricious,” which was Rogers’s point.

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While blatant price-fixing is rare, the lack of investment is a product of the paucity of competition in many sectors, where Canadian companies protected from foreign competition are sitting on fat profit margins and don’t feel compelled to invest to make their operations more efficient. “Competition can make the whole economy more productive,” said Rogers.

The Conservatives now look set to make this an election issue. Ontario MP Ryan Williams has just released a slick 13-minute video that makes clear his party intends to act in this area.

Using the Monopoly board game as a prop, Williams, the party’s critic for pan-Canadian trade and competition, claims that in every sector, monopolies and oligopolies reign supreme, resulting in lower investment, lower productivity, higher prices, worse service, lower wages and more wealth inequality.

(As an aside, it was a marked improvement on last year’s “Justinflation” rap video.)

Williams said that Canadians pay among the highest cell phone prices in the world and that Rogers, Telus and Bell are the priciest carriers, bar none. The claim has some foundation: in a recent Cable.co.uk global league table that compared the average price of one gigabyte, Canada was ranked 216th of 237 countries at US$5.37 (noticeably, the U.S. was ranked even more expensive at US$6).

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Williams noted that two airlines control 80 per cent of the market, even though Air Canada was ranked dead last of all North American airlines for timeliness.

He pointed out that six banks control 87 per cent of Canada’s mortgage market, while five grocery stores — Sobeys, Metro, Loblaw, Walmart and Costco — command a similar dominance of the grocery market.

“Competition is dying in Canada,” Williams said. “The federal government has made things worse by over-regulating airlines, banks and telecoms to actually protect monopolies and keep new players out.”

So far, so good.

The Conservatives will “bring back home a capitalist economy” — a market that does not protect monopolies and creates more competition, in the form of Canadian companies that will provide new supply and better prices.

That sounds great. But at the same time, the Conservative formula for fixing things appears to involve more government intervention, not less.

Williams pointed out the Conservatives opposed RBC buying HSBC’s Canadian operations, WestJet buying Sunwing and Rogers buying Shaw. The party would oppose monopolies from buying up the competition, he said.

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The real solution is to let the market do its work to bring prices down. But that is a more complicated process than Williams lets on.

Back in 2007, when Research in Motion was Canada’s most valuable company, the Harper government appointed a panel of experts, led by former Nortel chair Lynton “Red” Wilson, to address concerns that the corporate sector was being “hollowed out” by foreign takeovers, following the sale of giants Alcan, Dofasco and Inco.

The “Compete to Win” report that came out in June 2008 found that the number of foreign-owned firms had remained relatively unchanged, but recommended 65 changes to make Canada more competitive.

The Harper government acted on the least-contentious suggestions: lowering corporate taxes, harmonizing sales taxes with a number of provinces and making immigration more responsive to labour markets.

But it did not end up liberalizing the banking, broadcasting, aviation or telecom markets, as the report suggested (ironically, it was a Liberal transport minister, Marc Garneau, who raised foreign ownership levels of air carriers to 49 per cent from 25 per cent in 2018).

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The point is, Canada has a competition problem but solving it requires taking on vested interests. Conservative Leader Pierre Poilievre has indicated he is willing to do that, calling corporate lobbyists “utterly useless” and saying he will focus on Canadian workers, not corporate interests.

“My daily obsession will be about what is good for the working-class people in this country,” he said in Vancouver earlier this month.

Even opening up sectors to foreign competition is no guarantee that investors will come. There are no foreign ownership restrictions in the grocery market (in addition to the five supermarkets listed above, there is Amazon-owned Whole Foods). When the Competition Bureau concluded last year that there was a “modest but meaningful” increase in food prices, it recommended Ottawa encourage a foreign-owned player to enter the Canadian market. It was a recommendation adopted by Industry Minister Francois-Philippe Champagne, to no avail thus far.

But it is clear from the Bank’s warning that the Canadian economy requires some shock treatment.

Robert Scrivener, the chairman of Bell and Northern Telecom in the 1970s, called Canada a nation of overprotected underachievers. That is even more true now than it was back then.

It’s time to break the glass.

jivison@criffel.ca

Get even more deep-dive National Post political coverage and analysis in your inbox with the Political Hack newsletter, where Ottawa bureau chief Stuart Thomson and political analyst Tasha Kheiriddin get at what’s really going on behind the scenes on Parliament Hill every Wednesday and Friday, exclusively for subscribers. Sign up here.

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