Canada’s economy was headed for slowing growth in the next decade even if COVID-19 had never hit, according to a new report by Deloitte Canada.
The report, which looks at more than 1,000 variables to predict how Canada’s economy will look in 2030, suggests that the country will need more workers — with greater productivity — to get the economy chugging at a fast enough pace to pay for climate change initiatives and government investments without raising taxes.
“We believe Canada is the best place in the world to live and work and do industry. If we continue on our current path, that is compromised or in jeopardy,” said Deloitte Canada chief executive Anthony Viel.
The consulting and audit firm’s report comes as the government is laying out ambitious plans to spur the economy forward after the COVID-19 pandemic — and ensuing lockdown — left a record number of Canadians jobless. Last week’s speech from the throne suggested that the government will look toward clean energy investments, as well as disability and jobless supports, in its recovery plan.
Deloitte Canada did not directly address the throne speech in its report. But the firm predicts even a complete return to pre-pandemic “normal” would cause economic growth to slow to 1.7 per cent per year in the next decade. That’s below the past decade’s average of 2.2 per cent growth — which was already lower than the 3.2 per cent growth in the decade leading to the 2008 and 2009 recession.
Amid a low fertility rate — at a time when the share of Canadians over age 65 is expected to nearly double — Canada needs to be more inclusive of groups that are underemployed in the economy, the report found. Getting marginalized groups better integrated in the workforce can grow the tax base and help the government avoid raising tax rates, said Georgina Black, Deloitte Canada’s managing partner of government and public services.
Deloitte’s forecast suggests that the country could replace its retiring workforce by improving employment options for 88,500 women; 377,300 Canadians over age 65; 700,000 immigrants; 517,657 people with disabilities; and between 38,000 and 59,000 Indigenous Canadians.
The theory, Deloitte’s report said, is that boosting the number of hours worked in the economy would lift the pace of yearly economic growth by 50 per cent, adding $4,900 to Canadians’ average annual income by 2030, Deloitte estimated.
For instance, Deloitte cited a survey suggesting that more than 600,000 Canadians with disabilities said they would look for work if minor workplace barriers were removed.
“Many of these inequalities have worsened during the pandemic, with women and under-represented groups far more likely to become unemployed than men or non-racialized groups,” the report said.
Deloitte suggests companies need better disability accommodations and workplace inclusion policies, and should add childcare as a benefit package, noting that during COVID-19, women’s workforce participation dipped to 55 per cent for the first time since the mid-1980s as childcare options dwindled.
In Deloitte’s ideal recovery scenario, schools would offer better apprenticeship options and retraining programs for older workers in shrinking industries, and governments would invest in rural internet infrastructure and childcare for working parents. Regulators would step in under Deloitte’s plan and allow skilled immigrants to use their foreign credentials and degrees. Canada loses as much as $50 billion each year that could be contributed by underemployed immigrants, the firm said.
Despite requiring the government to spend money and set incentives for employers, Deloitte claims that its proposal would boost government revenues by nine per cent without raising taxes.
“More workers and more incomes means more taxes and more investment,” said Viel.
Canadian businesses also need to invest more in technology and late-stage startups, and Deloitte suggested investments should be focused on a few high-growth industries where Canada can be a leader, such as construction, medical equipment and computer system design.
“Government and business (need to) create the conditions where companies want to invest here and not in another country, ” said Black.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
