This column is an opinion by Robert Asselin, senior vice-president of policy at the Business Council of Canada, where he leads the development of strategies that contribute to jobs and economic growth. His experience includes academia, the private sector and government, including roles a policy advisor to two prime ministers and as a policy and budget director to the minister of finance. For more information about CBC’s Opinion section, please see the FAQ.
It’s not easy to find, but on page 142 of the federal government’s fiscal and economic update, in a little shadowed box, there’s a number that will have a big impact on Canadians for generations to come: “Accumulated deficit: $1,423 billion (55.5 per cent of GDP).”
That is Canada’s estimated federal debt in 2024.
Of note, this number does not include the long runway of new commitments promised in the fiscal update. Factoring in that extra spending, it is reasonable to project that our federal debt could climb to $1.7 trillion in the next few years.
By then, the federal government will have effectively added 1,000 billion dollars – yes, that is what $1 trillion means – to Canada’s debt since the end of the 2019 fiscal year.
Provincial governments have been accruing billions of dollars of new debt, too. If you add them together, in most cases the combined federal/provincial debt-to-GDP ratio has already reached 100 per cent of gross domestic product (GDP). In other words, the combined debt is equal to the entire value of all the goods and services produced in Canada in a year.
The government unveiled a record deficit of $381 billion in its fiscal update, along with spending plans for more pandemic relief and a huge stimulus plan to jolt the economy post-pandemic. 2:18
Of course, we are reminded constantly not to worry about the burgeoning debt, because the federal government has a lot of fiscal power and real interest rates are low — and will remain there for the foreseeable future.
As if that’s all we needed to care about.
Let’s agree wholeheartedly that extraordinary spending was absolutely necessary to help Canadians through the pandemic. Despite some weaknesses in the government’s emergency programs, there is great value in ensuring that Canadians are kept safe and healthy during the crisis.
Let’s also set aside the huge inter-generational equity problem stemming from the difficult questions around who will end up paying back the massive and growing debt we are incurring. Some tough and painful choices lie ahead if we want to ensure future generations are not hobbled by our current spending decisions.
Instead, let’s ask ourselves a straightforward and honest question: $1 trillion later, will Canada be better positioned for success in the emerging global economy?
Finance Minister Chrystia Freeland speaks with Rosemary Barton, CBC’s chief political correspondent, about the federal fiscal update and how the government will continue to provide financial support through the end of the COVID-19 pandemic. 3:30
A brighter economic future doesn’t happen by luck or just by virtue of saying we should have one. It requires a long-term plan and strategic investments in our productive capacity.
As former U.S. Treasury Secretary Larry Summers has often said, growth, not consumption, must be the priority of expansionary fiscal policy. Hypnotized by magical thinking that large deficits are by design a substitute for economic growth, Canada compares poorly to its peers when it comes to long-term ambitions.
Our competitors are taking a longer view of what is needed now to better position themselves for the future.
Besides these initiatives, some are literally shooting for the moon with investments in innovation. NASA recently announced it had selected the companies that will collect resources from the moon, building knowledge for future missions to Mars. Two companies are from the U.S, one is from Europe and one from Japan. Why isn’t there one from Canada?
CBC’s At Issue panel looks at the political messaging within the Liberal government’s first federal economic update since the start of the COVID-19 pandemic. Plus, what it could mean for the spring budget and a federal election. 9:08
One contributing factor is that Canada is only investing about 1.6 per cent of GDP on R&D, while several peer countries – including Denmark, Finland, Japan and South Korea – are close to or exceed 3 per cent.
Where is Canada’s economic vision for the future?
Why can’t we leverage our intellectual capital to create global firms that capture new markets like other countries do? Are we positioning ourselves to be successful in the fast-growing fields of artificial intelligence, cleantech or biotech?
When it comes to talent and intellectual property, we look more and more like a farm team for American companies. Where is our comprehensive growth agenda to address the structural challenges we face, such as a rapidly aging population, low productivity, and consistent trade deficits?
Electric vehicle charging stations and $5,000 grants for home retrofits may look flashy in a government document, but they will not get the country anywhere near the low-carbon transition we aspire to. And they do little to create the advanced industries we will need to drive our economy.
The debate over how cheap our debt will be to finance in the short run is inconsequential compared to the magnitude of the fiscal and economic challenges we will face over the longer horizon if we don’t raise our game. Our peer countries are not waiting for the pandemic to end to plan their economic futures, they are already moving fast and with purpose.
Are we happy to play for the bronze or do we want to go for gold? That is, figuratively, the trillion-dollar question we should be asking ourselves.
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.
