Economy
Liberals under pressure to balance competing asks in budget and economic update – Alaska Highway News
OTTAWA — The Trudeau Liberals are set to unveil an update on the health of federal finances and its outlook for the economy while facing competing demands on benefits, taxes and economic growth.
It’s a tall order for a document that the Finance Department has signalled won’t include a bevvy of new spending items.
The government outlined its major priorities in the spring budget, such as a national child-care system, said David Macdonald, senior economist with the Canadian Centre for Policy Alternatives.
From a political standpoint, the government doesn’t have a lot of time before the holiday season to promote any new, major measures, Macdonald said. The government will likely wait for next year’s budget for any big spending proposals, he said.
“I don’t think that there’s going to be a lot of actual new policy despite the fact we just had an election,” Macdonald said.
“There’s likely to be very little in there except the deficit figures are smaller, probably.”
The government predicted the deficit for last fiscal year would be $354.2 billion, and nearly $155 billion this year. But federal books could have as much as $10 billion in extra fiscal space helped by higher oil prices, which have also helped push up inflation rates.
Inflation rates that have hit 18-year highs, along with strong growth in employment and the domestic economy, could cause the government to ease up on its platform spending plans, said Stephen Brown, senior Canada economist with Capital Economics.
In a note, Brown wrote that extra spending seems more likely to push up inflation by the time any changes take effect.
“It will be more interesting to see if the government follows through with its myriad policy proposals for the housing market, which included a ban on purchases by foreign investors,” he wrote.
Finance Minister Chrystia Freeland suggested this week that the document would give an outlook on the path of this year’s deficit, and an accounting of new aid proposals that the government estimated to cost $7.4 billion.
Some of those calculations have to do with the effect the Omicron variant may have on case counts, and any subsequent need to tighten public health measures or impose lockdowns to slow the spread of the virus.
Bea Bruske, president of the Canadian Labour Congress, urged Freeland to use the document to spend more on benefits, saying in a statement that there are still thousands of workers who are facing financial uncertainty because of COVID-19.
She also suggested the government could use the document to outline its proposed changes to the employment insurance system, whose long-known shortcomings were exposed by the pandemic.
“The fiscal update must make clear that the federal government is prepared to make investments to make life more affordable and ensure vital services, like EI, are there for people when they need it,” Bruske said.
The Chartered Professional Accountants of Canada said Friday that the government could use the update to detail previously announced tax proposals that are supposed to kick in next year, including one on purchases of luxury cars, planes and yachts, and another on foreign-owned vacant homes.
“Some of the changes are supposed to apply in less than a month,” said Bruce Ball, CPA Canada’s vice-president, taxation.
“We’re looking for some clarity in terms of how that’s going to happen and also some reasonable time frames to allow consultation on the things that are still very conceptual and … time for businesses to adjust.”
This report by The Canadian Press was first published Dec. 12, 2021.
Jordan Press, The Canadian Press
Economy
Climate Change Will Cost Global Economy $38 Trillion Every Year Within 25 Years, Scientists Warn – Forbes
Topline
Climate change is on track to cost the global economy $38 trillion a year in damages within the next 25 years, researchers warned on Wednesday, a baseline that underscores the mounting economic costs of climate change and continued inaction as nations bicker over who will pick up the tab.
Key Facts
Damages from climate change will set the global economy back an estimated $38 trillion a year by 2049, with a likely range of between $19 trillion and $59 trillion, warned a trio of researchers from Potsdam and Berlin in Germany in a peer reviewed study published in the journal Nature.
To obtain the figure, researchers analyzed data on how climate change impacted the economy in more than 1,600 regions around the world over the past 40 years, using this to build a model to project future damages compared to a baseline world economy where there are no damages from human-driven climate change.
The model primarily considers the climate damages stemming from changes in temperature and rainfall, the researchers said, with first author Maximilian Kotz, a researcher at the Potsdam Institute for Climate Impact Research, noting these can impact numerous areas relevant to economic growth like “agricultural yields, labor productivity or infrastructure.”
Importantly, as the model only factored in data from previous emissions, these costs can be considered something of a floor and the researchers noted the world economy is already “committed to an income reduction of 19% within the next 26 years,” regardless of what society now does to address the climate crisis.
Global costs are likely to rise even further once other costly extremes like weather disasters, storms and wildfires that are exacerbated by climate change are considered, Kotz said.
The researchers said their findings underscore the need for swift and drastic action to mitigate climate change and avoid even higher costs in the future, stressing that a failure to adapt could lead to average global economic losses as high as 60% by 2100.
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How Do The Costs Of Inaction Compare To Taking Action?
Cost is a major sticking point when it comes to concrete action on climate change and money has become a key lever in making climate a “culture war” issue. The costs and logistics involved in transitioning towards a greener, more sustainable economy and moving to net zero are immense and there are significant vested interests such as the fossil fuel industry, which is keen to retain as much of the profitable status quo for as long as possible. The researchers acknowledged the sizable costs of adapting to climate change but said inaction comes with a cost as well. The damages estimated already dwarf the costs associated with the money needed to keep climate change in line with the limits set out in the 2015 Paris Climate Agreement, the researchers said, referencing the globally agreed upon goalpost set to minimize damage and slash emissions. The $38 trillion estimate for damages is already six times the $6 trillion thought needed to meet that threshold, the researchers said.
Crucial Quote
“We find damages almost everywhere, but countries in the tropics will suffer the most because they are already warmer,” said study author Anders Levermann. The researcher, also of the Potsdam Institute, explained there is a “considerable inequity of climate impacts” around the world and that “further temperature increases will therefore be most harmful” in tropical countries. “The countries least responsible for climate change” are expected to suffer greater losses, Levermann added, and they are “also the ones with the least resources to adapt to its impacts.”
What To Watch For
The fundamental inequality over who is impacted most by climate change and who has benefited most from the polluting practices responsible for the climate crisis—who also have more resources to mitigate future damages—has become one of the most difficult political sticking points when it comes to negotiating global action to reduce emissions. Less affluent countries bearing the brunt of climate change argue wealthy nations like the U.S. and Western Europe have already reaped the benefits from fossil fuels and should pay more to cover the losses and damages poorer countries face, as well as to help them with the costs of adapting to greener sources of energy. Other countries, notably big polluters India and China, stymie negotiations by arguing they should have longer to wean themselves off of fossil fuels as their emissions actually pale in comparison to those of more developed countries when considered in historical context and on a per capita basis. Climate financing is expected to be key to upcoming negotiations at the United Nations’s next climate summit in November. The COP29 summit will be held in Baku, the capital city of oil-rich Azerbaijan.
Further Reading
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Article content
Growth in gross domestic product (GDP), the total value of all goods and services produced in the economy annually, is one of the most frequently cited indicators of economic performance. To assess Canadian living standards and the current health of the economy, journalists, politicians and analysts often compare Canada’s GDP growth to growth in other countries or in Canada’s past. But GDP is misleading as a measure of living standards when population growth rates vary greatly across countries or over time.
Article content
Federal Finance Minister Chrystia Freeland recently boasted that Canada had experienced the “strongest economic growth in the G7” in 2022. In this she echoes then-prime minister Stephen Harper, who said in 2015 that Canada’s GDP growth was “head and shoulders above all our G7 partners over the long term.”
Article content
Unfortunately, such statements do more to obscure public understanding of Canada’s economic performance than enlighten it. Lately, our aggregate GDP growth has been driven primarily by population and labour force growth, not productivity improvements. It is not mainly the result of Canadians becoming better at producing goods and services and thus generating more real income for their families. Instead, it is a result of there simply being more people working. That increases the total amount of goods and services produced but doesn’t translate into increased living standards.
Let’s look at the numbers. From 2000 to 2023 Canada’s annual average growth in real (i.e., inflation-adjusted) GDP growth was the second highest in the G7 at 1.8 per cent, just behind the United States at 1.9 per cent. That sounds good — until you adjust for population. Then a completely different story emerges.
Article content
Over the same period, the growth rate of Canada’s real per person GDP (0.7 per cent) was meaningfully worse than the G7 average (1.0 per cent). The gap with the U.S. (1.2 per cent) was even larger. Only Italy performed worse than Canada.
Why the inversion of results from good to bad? Because Canada has had by far the fastest population growth rate in the G7, an average of 1.1 per cent per year — more than twice the 0.5 per cent experienced in the G7 as a whole. In aggregate, Canada’s population increased by 29.8 per cent during this period, compared to just 11.5 per cent in the entire G7.
Starting in 2016, sharply higher rates of immigration have led to a pronounced increase in Canada’s population growth. This increase has obscured historically weak economic growth per person over the same period. From 2015 to 2023, under the Trudeau government, real per person economic growth averaged just 0.3 per cent. That compares with 0.8 per cent annually under Brian Mulroney, 2.4 per cent under Jean Chrétien and 2.0 per cent under Paul Martin.
Recommended from Editorial
Canada is neither leading the G7 nor doing well in historical terms when it comes to economic growth measures that make simple adjustments for our rapidly growing population. In reality, we’ve become a growth laggard and our living standards have largely stagnated for the better part of a decade.
Ben Eisen, Milagros Palacios and Lawrence Schembri are analysts at the Fraser Institute.
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