Lack of business investment is the main culprit. Canadians are digging holes with shovels while our competitors are buying excavators
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.
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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 Press. All rights reserved.
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.
The Canadian Press. All rights reserved.
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.
The Canadian Press. All rights reserved.
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