A sign from striking Quebec health care workers lies on the ground in Montreal, on, Nov. 8.Christinne Muschi/The Canadian Press
Todd Hirsch is a Calgary-based economist, author and public speaker. He is also the director of the Energy Transition Centre and the former chief economist of ATB Financial.
Does anyone actually care about the economy any more?
It seems like a ridiculous question. After all, we’re bombarded with economic news. Our elected leaders fall over each other with slogans about the economy. Bill Clinton summed it up over 30 years ago: “It’s the economy, stupid!”
Yet what exactly is an economic issue? At its core, the economy describes how humans organize themselves around their material wants and needs. It’s about how businesses invent better mouse traps. It’s about how workers contribute, and benefit from, their talents. The market-based economic system is far from perfect and requires a lot of guard rails. Yet it is largely responsible for improving standards of living.
All this frantic chatter in the public sphere that might seem like it’s about the economy actually isn’t. It’s about a bunch of peripheral issues that are political, social and cultural.
Take the Liberal government’s fall economic update. It was chock full of measures dealing with the housing crisis – an entirely worthwhile goal. But the housing crisis is a social and political problem, not an economic one. It’s a great example of how the market-based economy falls short and requires government intervention. Housing, unlike most other consumer goods driven by supply and demand, is essential. Without it, you’ll probably die. So it transcends an economic issue and enters the realm of social and political issue. Governments, not the market, can solve the housing crisis if they work together.
Inflation and higher interest rates are, indeed, economic issues. But with inflation coming down, affordability is becoming the focus. How governments tackle that is once again a social and political question.
The federal Conservative “Axe the Tax” slogan seems to be about leaving more money in the pockets of Canadians. But scratch the surface and it’s more about ideology – particularly, the idea of less government intrusion.
Other events are swirling around us, and dominating our attention. This includes urgent ones (like war and the fentanyl crisis), less pressing ones (like Donald Trump’s legal woes and EV battery plants), and ridiculous ones (like dismantling the Canada Pension Plan) – but all are social and political, not economic.
Things that actually affect the viability of tomorrow’s economy are being ignored: productivity, the quality of education, skills training, innovation, research and development, trade, capital investment. For the most part, the urgency of these issues is being lost.
In 2023, a slough of reports – from the OECD to TD Economics – painted a bleak picture of Canada’s slipping economic competitiveness and productivity. Among our wealthy industrialized peers, Canada places dead last in real GDP per capita growth expected from both 2020-30 and 2030-60, according to the OECD. Our economy is less productive because Canadian companies are investing less in capital and technology. And we rank a meagre 17th out of 38 OECD countries in research and development spending in proportion to our GDP.
There were plenty of commentators and economists ringing the alarm bell. Yet much of this alarming news was met with a collective yawn. The outcome of that is not promising. A declining standard of living, slipping lower on global economic rankings, and a weaker tax base to fund our future social programs will be the result.
So what needs to happen?
First, Canadians need to start paying attention – and admittedly, this isn’t easy. With wars raging, forests burning and drug overdoses surging, it’s understandable that we would lose focus on building the future economy. But it’s possible to focus on both the economy as well as other things that truly matter. The trick is to filter out all of the nonsense issues that needlessly distract us. If voters were less worried about transgender students’ pronouns, and more worried about the health of our education system, we might actually get somewhere.
The second thing is greater determination by businesses to invest in long-term competitiveness and labour productivity. This, too, can be a challenge. With inflation pressures, workers shortages and tightening credit, businesses have a long list of hurdles to navigate. But it’s not sufficient for businesses to throw up their hands and blame government inaction. If your default solution to solve everything is to change the governing party, you’ve missed the point.
Which brings us to the third thing that needs to happen. Policy makers at every level need to facilitate entrepreneurship, encourage R&D spending, bolster education and simplify immigrant entry into the labour market. And if they need any practical ideas to get them started, they can refer to any of the thousands of policy papers put out by business councils and chambers of commerce.
As we sit on the doorstep of 2024, there is no end of troubling issues to worry us. But are we paying attention to the right ones? Or are we being distracted by nonsense? The strength of Canada’s future economy must surely fall into the category of things that urgently matter. Our standard of living, global competitiveness and ability to finance our social programs hang in the balance.
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.
