Economy

Matthew Lau: Trudeau Liberals economic update will make the bad even uglier

Published

10 months ago

November 20, 2023

Prime Minister Justin Trudeau and Finance Minister Chrystia Freeland arrive to deliver the federal budget in the House of Commons, Tuesday, March 28, 2023. Photo by Justin Tang/The Canadian Press

In the federal government’s 2023 fall economic statement, to be presented by Chrystia Freeland in the House of Commons on Tuesday, we will undoubtedly be told of the Liberals’ efficacious fiscal management and the wonderful economic results their policies have produced. But Canadians are suffering an economic crisis of unaffordability, the worst decade of growth since the Great Depression, a public sector rapidly rising in cost and notable for its inefficiency, a multitude of regulatory initiatives impoverishing consumers and the businesses who serve them, and haphazard taxation and threats of taxation to top it all off.

Whatever mumbo-jumbo the Liberals put in their economic statement is therefore unlikely to be believed by anyone except their most intransigent supporters. They are not bad people, most of them, but grasping economic reality is not among their specialties. Among those impervious to reality is the prime minister. On Friday, Justin Trudeau made the patently crackpot declaration that his government has “always exercised fiscal restraint.” In fact, they never have. When the Liberals were elected in 2015, the budget was balanced; they promptly threw it into deficit and even before the pandemic began, overspent the fiscal plan they inherited by $127 billion over four and a half years.

If spending an extra $127 billion on federal programs was reckless, Trudeau found it not enough, and has since outspent his own fiscal plans by even more astonishing margins. In Budget 2018, the Liberals projected federal spending (including interest payments and excluding a $3.0 billion “adjustment for risk”) of $383.2 billion in 2022-23. Actual spending for the year, last month’s release of the Public Accounts revealed, was $483.1 billion, so even with the pandemic over, annual spending is now inflated $100 billion above the Liberals’ 2018 plan. And the fall update may well push spending even higher.

Canadians have experienced first-hand the miserable outcomes the Liberals’ spending and general mismanagement have produced; a Statistics Canada report last week puts some numbers behind the experiences. A federal statistics agency’s research report is unlikely to be too political, but the story the data tell is a bloodbath for anyone trying to defend the Liberals’ economic record. “Declines in gross domestic product per capita portend lower living standards,” the title of one section reads. A line chart plots GDP per capita growth against the long-term trend.

From Q3-2015 to Q2-2023, real GDP per capita in Canada increased a paltry 1.6 per cent, far behind the 8.2 per cent trend line growth. The pandemic cannot be blamed: in the same period, the United States has seen 12.5 per cent growth. Nor can the pandemic explain why Canada real GDP per capita declined 2.0 per cent in the four quarters ended Q2-2023.

The StatCan report remarks that “raising standards of living will depend on productivity growth” but after spiking in early 2020, “labour productivity has declined in 11 of the past 12 quarters and is below pre-pandemic levels.” Business investment is the key to driving productivity, but in order to encourage it, taxation and regulation must be light and predictable — the opposite of current federal policies. Thus the StatCan observation that non-residential business investment today is 14 per cent below what it was in 2014, a key indication that without policy change, productivity and living standards are not soon to improve. The next four sections of the StatCan report highlight that “prices for many household staples remain elevated” and “shelter costs also remain high,” homeownership and rental costs are rising, residential construction has declined steadily since 2021, and rising living costs have impacted young and financially vulnerable households the most.

The takeaway from Canada’s public finances and the economic data is that Trudeau’s economic record is a shambles and every Liberal statement doubling down on raising spending and expanding regulation will make the bad economic outlook even uglier. If Canada has not quite reached the misery that the U.K. did in its 1978-79 Winter of Discontent in which there were widespread strikes and nothing seemed to work, in a poll earlier this year, two-thirds of Canadians agreed it feels like everything is broken. The U.K. reversed its decline by electing Margaret Thatcher in 1979 to deregulate, privatize, and reduce taxes. From being a basket case, thanks to a decade of Thatcher’s policies, the U.K. was restored to a position of strength and prosperity.

Canada too can reverse its decline before it becomes an honorary member of the Third World, but it will require undoing everything the Trudeau government has done since 2015 and that it continues to do now. Whatever is in the Liberals’ fall economic update, it will do no good.

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Economy

B.C.’s debt and deficit forecast to rise as the provincial election nears

Published

2 days ago

September 10, 2024

Anne Joseph

VICTORIA – British Columbia is forecasting a record budget deficit and a rising debt of almost $129 billion less than two weeks before the start of a provincial election campaign where economic stability and future progress are expected to be major issues.

Finance Minister Katrine Conroy, who has announced her retirement and will not seek re-election in the Oct. 19 vote, said Tuesday her final budget update as minister predicts a deficit of $8.9 billion, up $1.1 billion from a forecast she made earlier this year.

Conroy said she acknowledges “challenges” facing B.C., including three consecutive deficit budgets, but expected improved economic growth where the province will start to “turn a corner.”

The $8.9 billion deficit forecast for 2024-2025 is followed by annual deficit projections of $6.7 billion and $6.1 billion in 2026-2027, Conroy said at a news conference outlining the government’s first quarterly financial update.

Conroy said lower corporate income tax and natural resource revenues and the increased cost of fighting wildfires have had some of the largest impacts on the budget.

“I want to acknowledge the economic uncertainties,” she said. “While global inflation is showing signs of easing and we’ve seen cuts to the Bank of Canada interest rates, we know that the challenges are not over.”

Conroy said wildfire response costs are expected to total $886 million this year, more than $650 million higher than originally forecast.

Corporate income tax revenue is forecast to be $638 million lower as a result of federal government updates and natural resource revenues are down $299 million due to lower prices for natural gas, lumber and electricity, she said.

Debt-servicing costs are also forecast to be $344 million higher due to the larger debt balance, the current interest rate and accelerated borrowing to ensure services and capital projects are maintained through the province’s election period, said Conroy.

B.C.’s economic growth is expected to strengthen over the next three years, but the timing of a return to a balanced budget will fall to another minister, said Conroy, who was addressing what likely would be her last news conference as Minister of Finance.

The election is expected to be called on Sept. 21, with the vote set for Oct. 19.

“While we are a strong province, people are facing challenges,” she said. “We have never shied away from taking those challenges head on, because we want to keep British Columbians secure and help them build good lives now and for the long term. With the investments we’re making and the actions we’re taking to support people and build a stronger economy, we’ve started to turn a corner.”

Premier David Eby said before the fiscal forecast was released Tuesday that the New Democrat government remains committed to providing services and supports for people in British Columbia and cuts are not on his agenda.

Eby said people have been hurt by high interest costs and the province is facing budget pressures connected to low resource prices, high wildfire costs and struggling global economies.

The premier said that now is not the time to reduce supports and services for people.

Last month’s year-end report for the 2023-2024 budget saw the province post a budget deficit of $5.035 billion, down from the previous forecast of $5.9 billion.

Eby said he expects government financial priorities to become a major issue during the upcoming election, with the NDP pledging to continue to fund services and the B.C. Conservatives looking to make cuts.

This report by The Canadian Press was first published Sept. 10, 2024.

Note to readers: This is a corrected story. A previous version said the debt would be going up to more than $129 billion. In fact, it will be almost $129 billion.

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Economy

Mark Carney mum on carbon-tax advice, future in politics at Liberal retreat

Published

3 days ago

September 10, 2024

Anne Joseph

NANAIMO, B.C. – Former Bank of Canada governor Mark Carney says he’ll be advising the Liberal party to flip some the challenges posed by an increasingly divided and dangerous world into an economic opportunity for Canada.

But he won’t say what his specific advice will be on economic issues that are politically divisive in Canada, like the carbon tax.

He presented his vision for the Liberals’ economic policy at the party’s caucus retreat in Nanaimo, B.C. today, after he agreed to help the party prepare for the next election as chair of a Liberal task force on economic growth.

Carney has been touted as a possible leadership contender to replace Justin Trudeau, who has said he has tried to coax Carney into politics for years.

Carney says if the prime minister asks him to do something he will do it to the best of his ability, but won’t elaborate on whether the new adviser role could lead to him adding his name to a ballot in the next election.

Finance Minister Chrystia Freeland says she has been taking advice from Carney for years, and that his new position won’t infringe on her role.

This report by The Canadian Press was first published Sept. 10, 2024.

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Economy

Nova Scotia bill would kick-start offshore wind industry without approval from Ottawa

Published

3 days ago

September 10, 2024

Anne Joseph

HALIFAX – The Nova Scotia government has introduced a bill that would kick-start the province’s offshore wind industry without federal approval.

Natural Resources Minister Tory Rushton says amendments within a new omnibus bill introduced today will help ensure Nova Scotia meets its goal of launching a first call for offshore wind bids next year.

The province wants to offer project licences by 2030 to develop a total of five gigawatts of power from offshore wind.

Rushton says normally the province would wait for the federal government to adopt legislation establishing a wind industry off Canada’s East Coast, but that process has been “progressing slowly.”

Federal legislation that would enable the development of offshore wind farms in Nova Scotia and Newfoundland and Labrador has passed through the first and second reading in the Senate, and is currently under consideration in committee.

Rushton says the Nova Scotia bill mirrors the federal legislation and would prevent the province’s offshore wind industry from being held up in Ottawa.

This report by The Canadian Press was first published Sept. 10, 2024.

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