This column is an opinion by Robert Asselin, senior vice-president of policy at the Business Council of Canada, where he leads the development of strategies that contribute to jobs and economic growth. His experience includes academia, the private sector and government, including roles a policy advisor to two prime ministers and as a policy and budget director to the minister of finance. For more information about CBC’s Opinion section, please see the FAQ.
It’s not easy to find, but on page 142 of the federal government’s fiscal and economic update, in a little shadowed box, there’s a number that will have a big impact on Canadians for generations to come: “Accumulated deficit: $1,423 billion (55.5 per cent of GDP).”
That is Canada’s estimated federal debt in 2024.
Of note, this number does not include the long runway of new commitments promised in the fiscal update. Factoring in that extra spending, it is reasonable to project that our federal debt could climb to $1.7 trillion in the next few years.
By then, the federal government will have effectively added 1,000 billion dollars – yes, that is what $1 trillion means – to Canada’s debt since the end of the 2019 fiscal year.
Provincial governments have been accruing billions of dollars of new debt, too. If you add them together, in most cases the combined federal/provincial debt-to-GDP ratio has already reached 100 per cent of gross domestic product (GDP). In other words, the combined debt is equal to the entire value of all the goods and services produced in Canada in a year.
The government unveiled a record deficit of $381 billion in its fiscal update, along with spending plans for more pandemic relief and a huge stimulus plan to jolt the economy post-pandemic. 2:18
Of course, we are reminded constantly not to worry about the burgeoning debt, because the federal government has a lot of fiscal power and real interest rates are low — and will remain there for the foreseeable future.
As if that’s all we needed to care about.
Let’s agree wholeheartedly that extraordinary spending was absolutely necessary to help Canadians through the pandemic. Despite some weaknesses in the government’s emergency programs, there is great value in ensuring that Canadians are kept safe and healthy during the crisis.
Let’s also set aside the huge inter-generational equity problem stemming from the difficult questions around who will end up paying back the massive and growing debt we are incurring. Some tough and painful choices lie ahead if we want to ensure future generations are not hobbled by our current spending decisions.
Instead, let’s ask ourselves a straightforward and honest question: $1 trillion later, will Canada be better positioned for success in the emerging global economy?
Finance Minister Chrystia Freeland speaks with Rosemary Barton, CBC’s chief political correspondent, about the federal fiscal update and how the government will continue to provide financial support through the end of the COVID-19 pandemic. 3:30
A brighter economic future doesn’t happen by luck or just by virtue of saying we should have one. It requires a long-term plan and strategic investments in our productive capacity.
As former U.S. Treasury Secretary Larry Summers has often said, growth, not consumption, must be the priority of expansionary fiscal policy. Hypnotized by magical thinking that large deficits are by design a substitute for economic growth, Canada compares poorly to its peers when it comes to long-term ambitions.
Our competitors are taking a longer view of what is needed now to better position themselves for the future.
Besides these initiatives, some are literally shooting for the moon with investments in innovation. NASA recently announced it had selected the companies that will collect resources from the moon, building knowledge for future missions to Mars. Two companies are from the U.S, one is from Europe and one from Japan. Why isn’t there one from Canada?
CBC’s At Issue panel looks at the political messaging within the Liberal government’s first federal economic update since the start of the COVID-19 pandemic. Plus, what it could mean for the spring budget and a federal election. 9:08
One contributing factor is that Canada is only investing about 1.6 per cent of GDP on R&D, while several peer countries – including Denmark, Finland, Japan and South Korea – are close to or exceed 3 per cent.
Where is Canada’s economic vision for the future?
Why can’t we leverage our intellectual capital to create global firms that capture new markets like other countries do? Are we positioning ourselves to be successful in the fast-growing fields of artificial intelligence, cleantech or biotech?
When it comes to talent and intellectual property, we look more and more like a farm team for American companies. Where is our comprehensive growth agenda to address the structural challenges we face, such as a rapidly aging population, low productivity, and consistent trade deficits?
Electric vehicle charging stations and $5,000 grants for home retrofits may look flashy in a government document, but they will not get the country anywhere near the low-carbon transition we aspire to. And they do little to create the advanced industries we will need to drive our economy.
The debate over how cheap our debt will be to finance in the short run is inconsequential compared to the magnitude of the fiscal and economic challenges we will face over the longer horizon if we don’t raise our game. Our peer countries are not waiting for the pandemic to end to plan their economic futures, they are already moving fast and with purpose.
Are we happy to play for the bronze or do we want to go for gold? That is, figuratively, the trillion-dollar question we should be asking ourselves.
OTTAWA – Statistics Canada says real gross domestic product grew 0.2 per cent in July, following essentially no change in June, helped by strength in the retail trade sector.
The agency says the growth came as services-producing industries grew 0.2 per cent for the month.
The retail trade sector was the largest contributor to overall growth in July as it gained one per cent, helped by the motor vehicles and parts dealers subsector which gained 2.8 per cent.
The public sector aggregate, which includes the educational services, health care and social assistance, and public administration sectors, gained 0.3 per cent, while the finance and insurance sector rose 0.5 per cent.
Meanwhile, goods-producing industries gained 0.1 per cent in July as the utilities sector rose 1.3 per cent and the manufacturing sector grew 0.3 per cent.
Statistics Canada’s early estimate for August suggests real GDP for the month was essentially unchanged, as increases in oil and gas extraction and the public sector were offset by decreases in manufacturing and transportation and warehousing.
This report by The Canadian Press was first published Sept. 27, 2024.
TORONTO – Canada’s main stock index closed above 24,000 for the first time Thursday as strength in base metals and other sectors outweighed losses in energy, while U.S. markets also rose and the S&P 500 notched another record as well.
“Another day, another record,” said Angelo Kourkafas, senior investment strategist at Edward Jones.
“The path of least resistance continues to be higher.”
The S&P/TSX composite index closed up 127.95 points at 24,033.83.
In New York, the Dow Jones industrial average was up 260.36 points at 42,175.11. The S&P 500 index was up 23.11 points at 5,745.37, while the Nasdaq composite was up 108.09 points at 18,190.29.
Markets continue to be optimistic about an economic soft landing, said Kourkafas, after the U.S. Federal Reserve last week announced an outsized cut to its key interest rate following months of speculation about when it would start easing policy.
Economic data Thursday added to the story that the U.S. economy remains resilient despite higher rates, said Kourkafas.
The U.S. economy grew at a three-per-cent annual rate in the second quarter, one report said, picking up from the first quarter of the year. Another report showed fewer U.S. workers applied for unemployment benefits last week.
The data shows “the economy remains on strong footing while the Fed is pivoting now in a decisive way towards an easier policy,” said Kourkafas.
The Fed’s decisive move gave investors more reason to believe that a soft landing is still the “base case scenario,” he said, “and likely reduces the downside risks for a recession by having the Fed moving too late or falling behind the curve.”
North of the border, the TSX usually gets a boost from Wall St. strength, said Kourkafas, but on Thursday the index also reflected some optimism of its own as the Bank of Canada has already cut rates three times to address weakening in the economy.
“The Bank of Canada likely now will be emboldened by the Fed,” he said.
“They didn’t want to move too far ahead of the Fed, and now that the Fed moved in a bigger-than-expected way, that provides more room for the Bank of Canada to cut as aggressively as needed to support the economy, given that inflation is within the target range.”
The TSX has also been benefiting from strength in materials after China’s central bank announced several measures meant to support the company’s economy, said Kourkafas.
However, energy stocks dragged on the Canadian index as oil prices fell Thursday following a report that Saudi Arabia was preparing to abandon its unofficial US$100-per-barrel price target for crude as it prepares to increase its output.
The Canadian dollar traded for 74.22 cents US compared with 74.28 cents US on Wednesday.
The November crude oil contract was down US$2.02 at US$67.67 per barrel and the November natural gas contract was down seven cents at US$2.75 per mmBTU.
The December gold contract was up US$10.20 at US$2,694.90 an ounce and the December copper contract was up 15 cents at US$4.64 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 26, 2024.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in the base metal sector, while U.S. stock markets were also higher.
The S&P/TSX composite index was 143.00 points at 24,048.88.
In New York, the Dow Jones industrial average was up 174.22 points at 42,088.97. The S&P 500 index was up 10.23 points at 5,732.49, while the Nasdaq composite was up 30.02 points at 18,112.23.
The Canadian dollar traded for 74.23 cents US compared with 74.28 cents US on Wednesday.
The November crude oil contract was down US$1.68 at US$68.01 per barrel and the November natural gas contract was down six cents at US$2.75 per mmBTU.
The December gold contract was up US$4.40 at US$2,689.10 an ounce and the December copper contract was up 13 cents at US$4.62 a pound.
This report by The Canadian Press was first published Sept. 26, 2024.
