Canada’s Prime Minister Justin Trudeau takes part in a child care announcement in Ottawa on Dec. 15.BLAIR GABLE/Reuters
Two streams of news are playing out this week: the Liberal government’s economic agenda, and the spread of the Omicron variant of COVID-19. Both have political consequences.
Finance Minister Chrystia Freeland’s midterm report, released Tuesday, made it clear that, for this government, social priorities trump economic concerns.
Stronger-than-expected economic growth (part of it inflation-induced) has lowered the projected deficit for this year, to a still-eye-watering $145-billion. But instead of using the increased revenue to lower that figure, the Liberal government will be increasing spending, including $40-billion over seven yearsto compensate First Nations children and families for the failures of the child-welfare system.
This comes on top of the Liberal government’s ambitious child-care program, which will permanently increase federal spending by more than $8-billion a year when fully implemented, the equivalent of more than a third of the defence budget for one single program.
The Liberals have increased health care funding to the provinces. They made $78-billion in commitments over five years during the election campaign that will be incorporated into the next full budget. They are offering $5-billion to assist British Columbia in the wake of recent disastrous floods, with more to come.
Even as this government establishes new records in spending and debt, a serious challenge from south of the border threatens the Canadian economy. Alexander Panetta, the CBC’s Washington correspondent, tweeted on Wednesday that he was pressing senators about a proposed provision in the Build Back Better bill that would impose a stiff tariff equivalent on electric vehicles built in Canada for sale in the United States.
When Mr. Panetta asked Sherrod Brown, Democratic senator from Ohio, about a letter Ms. Freeland and International Trade Minister Mary Ng had sent urging senators to drop the restriction, Mr. Brown replied: “I don’t care what Canada thinks.”
If the Senate passes the bill with the EV import restriction in place, the Canadian economy could take a significant hit. And it won’t help that the federal government is threatening to impose retaliatory tariffs in return. Canada cannot win a trade war with the United States, and that trade war will itself damage the economy.
With inflation running at almost 5 per cent, the government this week renewed the Bank of Canada’s mandate to keep it at around 2 per cent. If the inflation rate doesn’t come down soon, governor Tiff Macklem will have no choice but to raise interest rates, which will slow economic growth and cause pain for anyone with a mortgage or other forms of debt.
All this comes amid growing concern within the public service over the Liberals’ lack of interest in generating economic growth, as my colleagues Robert Fife and Steven Chase reported this week.
That lack of concern should come as no surprise. Like his father Pierre, who showed little interest in economic issues, preferring to focus instead on constitutional concerns, the Prime Minister places a low priority on fiscal or monetary policy.
When asked in 2014 whether he would be willing to run deficits as prime minister, he famously replied: “The commitment needs to be a commitment to grow the economy and the budget will balance itself.” On his watch, the budget has never been balanced.
Questioned about rising inflation during the election campaign in August, he said, “You’ll forgive me if I don’t think about monetary policy. You’ll understand that I think about families.”
At some point, voters are going to notice.
Polls have shown over the years that when the economy is the top concern among voters, Conservatives move ahead of the Liberals. But when other concerns push the economy down the list, the Liberals do better.
“Concern about the economy could be the sleeper issue of 2022,” says pollster Nik Nanos of Nanos Research.
“Canadians have seen a Trudeau Liberal government that has spent funds to help Canadians and Canadian enterprises get through the pandemic,” he told me by e-mail, “but there is less of a sense of how it would invest to create jobs and prosperity. Canadians today are more pessimistic about the future than at any time since we have started tracking this.”
The day the economy matters more to voters than the pandemic is a day the Liberals should worry about.
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 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.
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.
:format(jpeg)/cloudfront-us-east-1.images.arcpublishing.com/tgam/HV6KDVRUNNP3JER7FF2VWUKJEU.JPG)
