This week, the world’s most influential central banker, U.S. Fed Chair Jerome Powell, called the delta variant a “wild card” for the global economy.
While there are warning signs that the growing impact of this new, more contagious strain may play a role in the upcoming Canadian election, economic observers say that by itself, a slowdown during the campaign may not have the effect it might have had in the past.
As the health of Canadians takes centre stage in the minds of voters, and as parties take turns proposing their own stimulus measures, some say fiscal conservatives may have more trouble rousing voters this time around.
That is not to say economic issues related to the pandemic — such as the cost of housing, a 10-year high for inflation, business shutdowns and the effect of school closings on working parents — won’t also become election issues.
Same goals, different methods
A lot of the difference between the federal parties is less in their economic goals — for each, that includes long-term pandemic recovery — than in the details of how they get there, said Michael Smart, a University of Toronto economist and founder of the think-tank Finances of the Nation.
“It’s a great time to be a policy nerd,” he quipped.
Voters don’t always read the policy fine print. And in a global pandemic, it’s not only the virus and its variants coming from outside Canada — so too do many of its economic impacts.
A surge in Canadian inflation, caused by the kind of stimulus all the parties are supporting, is hard to separate from the even-higher inflation seen in the U.S., our southern neighbour and biggest trading partner.
Conservative Leader Erin O’Toole has proposed a GST ‘holiday’ — or sales tax cut for the month of December — as a way to stimulate the economy. (Cole Burston/Reuters)
The Bank of Canada always insists it sets rates independently, based on the needs of the Canadian economy. But a sudden jump in rates to quell inflation would inevitably affect the loonie, leading to a potentially devastating effect on Canadian exports.
While Canada’s high vaccination rate may be helping the country avoid the worst of a delta-driven fourth wave, there are already signs the variant’s spread in places such as the U.S. and China is affecting markets and supply lines.
And production and transportation bottlenecks are showing few signs of easing, leading to higher producer prices and thus higher consumer inflation.
“Public health shocks come from abroad. So do economic shocks,” said Smart. “Should Canadians hold politicians responsible for how the economy is performing [right now]? Probably not, to be honest. But will they? I don’t know.”
One COVID-19-related economic issue that commentators say could well have an impact on how people vote is business shutdowns.
While many small businesses have lobbied against some public health measures that they saw as preventing them from earning a living, a number of small business owners are particularly anxious to avoid new shutdowns at all costs, said Shadi McIsaac, CEO of RBC subsidiary Ownr, which helps new companies register and incorporate.
Liberal Leader Justin Trudeau visits a business in Longueuil, Que. More businesses are welcoming measures that will help avoid COVID-19-related shutdowns. (Andrej Ivanov/Reuters)
“Almost every entrepreneur who lost a customer — and that was upwards of 90 per cent — was still worried about further lockdowns and economic uncertainty that was looming ahead for them,” said McIsaac.
Rather than worrying about how the federal government will pay for all the bailouts so far, businesses are still focused on the danger of a fourth wave and whether they can survive it, she said.
“What we heard from business owners is that they are going to be listening very closely on each party’s policy and perspective, both from a financial standpoint — so what are the funding and grants that are coming forward to support entrepreneurship and small business community; and what’s the sentiment [of each] around further lockdowns.”
As Smart explained, there are broadly two considerations for the economy during this election — and both involve more stimulus. One is having a response ready in case the economic recovery falters, whether due to a new variant or some other cause; the other is to recharge the economy once the threat from the virus finally passes.
Sales tax holiday
Whether the stimulus is in new spending, or as the Conservatives have proposed, a sales tax holiday to drive immediate consumer spending, that stimulus will likely end up circulating in the Canadian economy and will pay for itself in higher future tax revenues, said Smart.
David Macdonald, senior economist at the Canadian Centre for Policy Alternatives, agrees that balancing the budget will be a very theoretical consideration in this election.
“I think no matter which party you are, there’s no realistic way you’re going to get to a zero deficit, probably, in the next three years,” said Macdonald.
Beyond retail closures, Macdonald pointed to what could be an even more politically contentious kind of lockdown: Schools, which will open well before voting day on Sept. 20.
Another round of school closures would not just annoy long-suffering parents, he said, but would have an important economic impact, as workers are forced to stay home to supervise kids, many of whom are unvaccinated.
If that happens, he said, the question is where the blame will land for voters.
“I think really the biggest economic issue right now is how we get through the fourth wave,” said Macdonald. “How do we support workers and businesses, just the way we’ve been doing for a year-and-a-half?”
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.
