Finance Minister Chrystia Freeland speaks during question period in the House of Commons on Parliament Hill in Ottawa on Oct. 3, 2022.Sean Kilpatrick/The Canadian Press
Finance Minister Chrystia Freeland will release a fall economic statement Thursday that includes new money for students and low-income workers, while also delivering a message that Ottawa is committed to fiscal discipline and won’t fan the flames of inflation.
Two government sources say the update will also include new details on the Canada Growth Fund, which was first announced in the April budget as a $15-billion plan to spur investment in a net-zero emission economy.
There will also be new details regarding Canada’s response to the recently approved Inflation Reduction Act in the United States, a massive bill that contains a host of government incentives for green energy investments that Canadian business leaders have said creates competitiveness concerns.
The Globe and Mail is not identifying the sources as they were not authorized to comment publicly on the matter.
Private-sector forecasts suggest Ms. Freeland, who is also Deputy Prime Minister, will be in a position to announce that the deficit for the current fiscal year could be smaller than the $52.8-billion projected in the April budget.
The Parliamentary Budget Officer released a report last month saying this year’s deficit is on track to be $25.8-billion, but that doesn’t account for new spending that will be announced in Thursday’s update. The PBO also projected a steadily declining deficit in future years. Other economists have offered a different take, projecting a recession in 2023 that will push next year’s deficit higher.
Federal Innovation Minister François-Philippe Champagne laid out the government’s dual message Wednesday while speaking with reporters.
“It’s a time to support Canadians. I mean, we have all seen the price of milk, the price of bread, the price of energy. It’s a time to help Canadians,” he said when asked whether Thursday’s statement will show Ottawa is reining in spending. He later added: “It is certain that we are in an economic period where caution is in order.”
A key challenge is ensuring that fiscal policy and monetary policy are not acting at cross purposes in the current inflationary environment. The government may be inclined toward new spending or tax relief measures to support Canadians struggling with rising prices. But this can be counterproductive, as new spending or tax cuts add to overall demand in the economy, boosting inflation.
The April budget said the deficit would drop to $8.4-billion by 2026-27. The PBO said in its report that the deficit will drop to $3.4-billion by that year.
An economic update typically includes an overview of the Finance Department’s expectations for the Canadian economy and often announces some new spending. The documents include revised estimates for what the latest economic and spending trends mean for Ottawa’s projected bottom line over the coming years.
Through a series of recent speeches ahead of Thursday’s update, Ms. Freeland has presented an economic message focused on fiscal discipline and encouraging economic growth through programs that boost research and development and investment in clean energy.
Perrin Beatty, president and chief executive officer of the Canadian Chamber of Commerce, said in an interview Wednesday that he’d like to see the update show a clear path to a balanced budget. While he said support for those most in need may be required, he hopes to see an update that provides a clear agenda for economic growth.
“We’re moving past the pandemic now. And what we need to do is to make sure that we have a path to getting our financial or fiscal house in order,” he said. “You can’t cut your way back to balance given the size of the deficit and debt. Nor should we be looking at inflating our way out of the debt that we’ve accumulated. The only responsible way to achieve it is through growth. And that means then that we’ve got to unlock investment from the private sector.”
The Liberal government announced a $4.6-billion package of inflation-relief measures in September aimed at lower-income Canadians.
Canadian Labour Congress president Bea Bruske said in an interview Wednesday that more is needed, but she is not expecting much from Thursday’s statement.
“We expect to see very few new investments announced in this update, and so we’re a little bit concerned about that,” she said. “We do think that there’s a dire need for some of those investments, because workers are certainly feeling very stretched these days, with the rate of inflation and with everything else that’s going on in the world.”
The economic outlook has worsened in recent months. The Bank of Canada’s aggressive push to tackle inflation with higher interest rates is hitting the housing market, squeezing consumer spending and dampening business investment. Exports are also expected to drop as commodity prices fall and key trading partners tip into recession in the coming months.
The Bank of Canada now expects near-zero GDP growth in Canada for the rest of the year and the first half of 2023.
“It’s not a severe recession, it’s not a major contraction, but you could certainly get a couple of quarters of negative growth,” Bank of Canada Governor Tiff Macklem told a Senate committee on Tuesday.
Multiple forces are coming together to produce the slowdown. Having allowed inflation to surge to a multidecade high, central banks around the world are rapidly increasing interest rates in one of the most comprehensive monetary policy tightening episodes on record. The U.S. Federal Reserve, the world’s largest and most important central bank, announced another 0.75-percentage-point rate hike on Wednesday.
Meanwhile, Russia’s invasion of Ukraine has caused an energy crisis in Europe, and China’s COVID-19 lockdowns have further disrupted global supply chains.
The International Monetary Fund said last month that roughly a third of the global economy will be in recession next year and warned that “the worst is yet to come.” Canada does have some advantages, and the IMF expects it to post the second strongest growth next year among G7 countries, after Japan.
“We are fortunate that this war is a bit further away from us,” Mr. Macklem told the Senate committee. “The other advantage we have is we produce many of the commodities that are in short supply. We export oil, we export natural gas, we export wheat, we export potash. The prices of those things are high.”
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.
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