Economy

Why is everyone so miserable when the economy isn't? – The Globe and Mail

Published

1 year ago

September 9, 2023

Inflation has tumbled in recent months. The jobs market continues to hum along. Yet if you ask Canadians how they are feeling, the overwhelming answer is miserable.

Why is there such a disconnect between the state of the economy as measured by many standard indicators and the public mood about the economy? There is no simple explanation, but the gap between the two is getting hard to ignore.

The Conference Board of Canada declared this week that its indexes of consumer and business confidence have fallen to their lowest levels since the pandemic. It added that a sizable majority of Canadians – 61 per cent – say the country is already in a recession.

Economic turmoil is pushing people toward despair, according a poll published this week by Mental Health Research Canada. Nearly four in 10 of the 3,819 people it surveyed said economic issues are affecting their mental health.

These are disturbing numbers. However, they are difficult to explain by pointing to some obvious economic emergency.

Yes, it’s true that Canada’s output flatlined in the second quarter. However, that was in part a reflection of massive forest fires. On most economic measures, Canada still seems far from desperate.

Unemployment, for instance, continues to hover close to multi-decade lows. Wages are growing at a healthy 4- to 5-per-cent clip. Stocks are up this year; so are home prices.

The only major economic variable that is plunging is inflation and that is exactly the one that we want to be plunging. Total consumer price index inflation – and, yes, that includes both food and energy prices – has slid to 3.3 per cent, less than half its peak of 8.1 per cent in June, 2022.

So what’s going on here? Why have people turned so much gloomier than the standard numbers would suggest is reasonable?

One theory is that it has something to do with the anxiety-inducing impact of inflation. Consumers hate seeing their salaries and savings corroded by rising prices. Maybe they are still struggling to adjust to the vicious ups and downs of inflation over the past couple of years.

This seems plausible. It doesn’t explain, though, why the dramatic plunge in inflation in recent months hasn’t brightened the mood.

A more disturbing explanation for the boom in gloom is that many Canadians are worried about how rising interest rates are going to affect their ability to keep up with mortgage payments.

This, too, seems like reasonable grounds for distress. However, it also seems a trifle premature. Many homeowners are still benefiting from low-rate mortgages they negotiated during the pandemic. By the time their current mortgages expire in a year or two, there is a good chance that the Bank of Canada will have chopped rates.

This brings us to a more comprehensive theory: Maybe Canadians are growing glum because it is now becoming obvious that many of Canada’s structural problems are getting worse, not better.

One obvious example is home prices. They have moved far beyond the buying power of many households, according to Royal Bank of Canada’s affordability calculations. While rising interest rates may have slightly cooled parts of the market, home ownership remains out of reach for most young Canadians.

Policy makers talk about this problem endlessly, but do little to actually address it. Nineteen months ago, the Ontario government’s housing affordability task force delivered 55 recommendations to boost housing supply. So far, the province has implemented only three of them, according to economist Mike Moffatt of the PLACE Centre, an Ontario-based think tank dedicated to encouraging sustainable communities.

Ottawa is also fumbling the ball. It talks up its commitment to housing affordability, but remains wedded to a supersized immigration strategy that is overwhelming the country’s supply of housing.

The immigration strategy seems designed to boost Canada’s economic output, or gross domestic product (GDP), by rapidly increasing the number of people in the country. However, it does nothing to improve the standard of living for individual Canadians. The key factor there isn’t Canada’s total amount of GDP but rather its GDP per capita – how much output there is per person.

Remarkably, Canada’s real GDP per capita hasn’t budged in six years. This may surprise you. On paper, the country’s output has shot up by nearly 33 per cent since 2017. But as Mr. Moffatt points out, once you deduct the impact of inflation and population growth, all the apparent growth disappears.

The long stagnation offers one excellent reason for why Canadians may be feeling down despite an economy that is still chugging along nicely on many fronts.

The question now is what happens next. Bank of Montreal economist Benjamin Reitzes pointed out in a note this week that Canadian living standards have risen steadily over the past six decades thanks to rising GDP per capita. The only times that real GDP per capita did not grow over a six-year period since the 1960s were in the early 1990s, the pandemic – and now.

“Perhaps it’s time to re-examine Canada’s economic policies and priorities,” Mr. Reitzes wrote. Amen to that.

Adblock test (Why?)

Source link

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.

Source link

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.

Source link

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.

Source link