Canada economy 2015

McGill Prof. Chris Ragan chairs high-profile group on economic and environmental fiscal reform

How negative interest rates could have a positive economic impact
When it doesn’t pay to hoard cash, banks are encouraged to lend and boost the economy
(CBC) With a hypothetical rate mentioned Tuesday by central bank governor Stephen Poloz of minus 0.5 per cent, down from the current rate of 0.5 per cent, that would mean banks depositing their money with the central bank would lose 50 cents for every $100 they deposited.
But if banks were being “punished for saving,” as [BMO chief economist Doug] Porter puts it, and losing value on what they keep on deposit with the central bank, they would essentially be encouraged to stop hoarding their cash.
In turn, this could lead to banks lending more to consumers and businesses, said Patti Croft, an independent economic analyst and former chief economist of RBC Global Asset Management.
“When faced with the choice of lending money and getting a rate of return on their loans, or eat fees to keep their money in the Bank of Canada, most banks would choose the former,” said Croft.
She said negative interest rates wouldn’t affect consumers looking to save their money, meaning they wouldn’t have to pay the bank to store their cash, because interest rates offered by banks to savers “never go below zero.”
7 December
Liberal tax changes to cost federal treasury $1.2B per year
(BNN) Finance Canada released a costing Monday that shows an additional annual shortfall of $1.2-billion, including new revenue from reverting to the previous annual contribution limits to tax-free savings accounts as of Jan.
Finance says the tax cut will reduce federal revenues by about $4.1-billion in 2019-20, while the tax hike will only raise $2.4-billion that year. Corresponding technical tax changes to the tax rules governing small businesses will raise $250-million in additional annual revenue that year, but not enough to bridge the gap
No need to rush to take advantage of this year’s $10,000 TFSA limit
You could do it in 2016, or any year after that. The new Liberal government announced Monday that the maximum amount you can put in a tax-free savings account will fall to $5,500 for 2016. But $10,000 still goes for this year, and you can carry that room forward into future years if unused.
Liberals detail how they will roll back TFSA contribution limits
Federal Finance Minister Bill Morneau confirmed Monday that the contribution limit on the tax-free savings account will drop back to $5,500 from $10,000 effective Jan. 1, 2016, but that the limit for 2015 will remain untouched. Mr. Morneau also announced that contributions will be indexed to inflation as of next year.
Tyler Meredith (IRPP) comments: The TFSA is a good addition to mix of savings options, and is well designed for low income earners. But doubling the contribution limit would only worsen wealth and income inequality, do little to help the key under-saving population (mid income middle aged workers), erode tax bases both federally and provincially when that revenue is most needed as we face an aging population, and disproportionately benefit upper-income earners.
27 October
Nine takeaways from the Alberta budget
Debt
Alberta’s debt is projected to ratchet up to $36.6 billion by the 2017-18 fiscal year. For the first time since 1994, the government is borrowing for operating spending – not just capital spending. A new act will limit Alberta government borrowing to 15 per cent of the GDP.
Job creation
A Job Creation Incentive program will support the creation of 27,000 new jobs in both 2016 and 2017. Grants of up to $5,000 per new full-time equivalent position will be available on a first-come, first-served basis to small, medium and large corporations, registered charities, and other non-profit entities.
Tax hikes
The government is increasing tobacco, liquor and the locomotive fuel taxes. It will freeze post-secondary tuition for two years – and provide more funding for social services and women’s shelters.
Frozen spending
Salaries for cabinet ministers, MLAs, and political staff are frozen for four years.
Infrastructure
The budget also includes a significant increase in infrastructure spending – a total of $34 billion of construction on big-tickets items such as schools, roads, bridges, health facilities and equipment over the next five years.
25 October
Justin Trudeau: Leader who was born to run
Canada’s prime minister is out to prove the politics of optimism works, writes Gary Silverman
(Financial Times) “I’m on the side of both economists and people who say why put off investing when we have an opportunity now,” he said in a campaign interview with the Financial Times.
His economic ideas give his victory international significance. Mr Trudeau sits in the middle of an intellectual circle buzzing with talk about “secular stagnation” — a thesis that holds greater fiscal stimulus is needed to lift the industrial world out of its doldrums. “My style . . . is to gather around me brilliant people,” he told the FT, pointing proudly to a brains trust that includes such
advocates of increased public investment as Lawrence Summers, the former US Treasury secretary (and FT contributor).
Within hours of Mr Trudeau’s win, Mr Summers was making the case that US presidential candidates should take note of the Canadian results because they show “progressives do best when they reject austerity and embrace public investment”. Days later, the influential New Yorker magazine picked up on the theme, proclaiming: “The eyes of the world will be on Canada.”
How Mr Trudeau will handle this scrutiny remains to be seen. But he has come a long way in a matter of weeks. Canada’s pretty face now stands a chance of becoming a global role model.
The fulsome praise of FT’s post-election piece will surely stimulate further comment from Wednesday Night economists; already, Kimon and Tony have posted this exchange
Antal Deutsch: Please note that the endorsement is of electoral success for promising increased public spending, not public spending itself. If Trudeau II surrounds himself with people mesmerized by “secular stagnation” , a theory preached by Alvin Hansen during the Depression, heaven help us! Summers raised the topic 4-5 years ago, as a possible justification for continuing monetary easing in the US., not for increased government spending.That was 4-5 years ago.
Kimon Valaskakis: My own view, and I guess I reveal my Keynesian bias, is that when there is unused capacity as in the case of unemployment or underemployment public spending is a good idea . Canada has unused capacity, an aging infrastructure and is suffering the end of the commodity boom. Under these circumstances to borrow in order to rebuild infrastructure would seem to me to constitute sound policy.
10 October
Canada’s leadership candidates don’t know what innovation means
By Dan Breznitz, Munk Chair of Innovation Studies and a co-director of the innovation policy lab at the Munk School of Global Affairs
(Globe & Mail) Innovation is not the invention of new technologies and products. Innovation is the complete process of taking new ideas and devising new or improved products and services that are then sold in the marketplace. The true impact of innovation was not in the invention of the internal combustion engine or the first automobile – the true impact was the continuous implementation of large and small inventions to make the car a better and cheaper product, to improve its production and to continuously find ingenious ways to sell, market and service it.
… at its most basic level, innovation policy must aim first to lower (but not eliminate) risk to a level where entrepreneurs and firms are stimulated to undertake more innovation. The second policy aim should be to create a vibrant ecosystem where actors can collaborate and excel. To do this, the government needs to come up with a legal scheme that, on one hand, allows innovators to reap sufficient benefits that greed serves as a powerful incentive, but on the other hand, allows for the most rapid diffusion so that other companies, individuals and organizations can use it to improve productivity and form the basis for the next round of innovation. This, in essence, is what intellectual property rights, such as patents, trademarks and copyrights, are supposed to accomplish.
Just as importantly, innovation policy should aim to maximize the economic benefits for Canada from Canadian innovation. … No longer can one country excel at all stages of product development and production. Therefore, we must rethink what innovation-based growth means and what the best strategies for investment might be.
6 October
Chris Ragan: A few small deficits may actually be just what Canada needs
The next federal government does need to avoid large and sustained budget deficits that lead to a high debt-to-GDP ratio. But it also needs to recognize how its fiscal policy can help the economy, both in the short run and over the longer term. Small budget deficits now, used to finance productive and long-lasting infrastructure, can provide exactly the benefits that Canadians now need.
5 October
TPP deal ‘in best interests’ of Canadian economy, Stephen Harper says
Historic 12-nation tariff-cutting pact is in Canada’s best interest ‘without any doubt’
Conservative Leader Stephen Harper says the historic deal protects Canadian jobs today and creates more for generations to come as it secures access to hundreds of millions of new customers in the Asia-Pacific region.
But it won’t please everyone.
27 September
ADOMAIT, MINTZ and RAGAN
Three economists grade the leaders’ performances on the election trail
22 September
An intelligent, informed discussion of a vital underpinning of the Canadian economy. So proud our friend and Wednesday Nighter Mario Iacobacci was one of the participants
Money talks, but national transportation strategy creates movement
While panelists at the briefing each provided their own unique recommendations for transportation policy, including investment in rail systems, public transit, forgotten methods like internal shipping, an emphasis on tourism and support for air travel, as well as a focus on funding merit-based infrastructure projects, [Patrick Leclerc, CEO of the Canadian Urban Transit Association] made an assertion that seemed to cut through every speaker’s background and professional hopes.
“We’re really tackling transportation in silos. We’re talking about freight, and then we’re talking about commuter rail, and light rail. Then buses, and then transit,” he said. “But that’s not how it works. If we really want to have a vision for the future, we need to look at it in a very comprehensive way.”
(Hill Times) Political parties are promising big bucks to transportation and infrastructure improvements in the lead-up to the election, as well as in advance of the Dec. 24 release of David Emerson’s report reviewing the Canada Transportation Act. But experts caution that simply throwing money at developments will not be enough, and that parties should prioritize strategy and innovation over cash-trumping assurances.
At an early-morning transportation policy briefing in Ottawa, hosted by The Hill Times on Sept. 22, panelists emphasized that Canada’s channels of moving goods and people locally, cross-country, and internationally are key to economic growth, and require a national, multi-government strategy that explores under-utilized opportunities. (Video)

15-17 September

Federal leaders trade pointed barbs during debate on economy
Harper, Mulcair and Trudeau clash in Calgary during Globe and Mail debate
(CBC) This second debate, certainly a higher energy affair than the first, saw Conservative Leader Stephen Harper on the defensive during attacks from NDP Leader Tom Mulcair and Liberal Leader Justin Trudeau, who claimed his economic policies have resulted in hundreds of thousands of job losses and stagnant economic growth.
At Issue: Debating the Economy
Jeffrey Simpson: Don’t be fooled by the (surprise!) budget surplus
In that 2014 budget, expenses were predicted to rise by $9-billion from 2012-13 to 2015-16. Expenses increased largely because of higher transfers to the provinces and soaring payments to the elderly. These would be somewhat offset by the government’s freeze of departmental spending and by instructing departments to return unspent money to the treasury – the “careful stewardship.”
According to the Parliamentary Budget Office, Ottawa will be in the fiscal pink no matter the political complexion of the next government. Provincial finances, however, will get worse because they deliver the most labour-intensive services (health, education, policing). Most of the provinces are running real (not shell-game) deficits. Most of them have high and growing debt levels. The fossil-fuel provinces face a particularly uncertain future, having built high-cost programs into a now-unrealistic revenue picture.
The aging of the Canadian population will lower growth and increase spending. No government will be able to escape the dilemmas that flow from this reality, yet no party is apparently willing to talk about them.
Federal departments left $8.7 billion unspent last year
(The Ottawa Citizen) Conservative Leader Stephen Harper on Monday defended federal departments for holding on to billions of dollars last year. The unspent money was instead returned to the federal treasury, and played a huge role in the Conservative government posting a $1.9-billion budget surplus in the last fiscal year.
Finance Canada reported the federal surplus Monday, after initial projections in April had suggested a $2-billion deficit. The report said a variety of factors were responsible for the surplus, including a slight bump in government revenue from corporate and personal income tax.
But federal departments and agencies also chipped in by handing back an estimated $8.7 billion for different programs that had been requested — and in some cases publicly announced — by the government and approved by Parliament.
14 September
Federal surplus gives Harper a boost as debate on economy looms
(Ottawa Citizen) The federal government’s surprise $1.9-billion surplus in 2014-15 was a welcome boost to Stephen Harper’s Conservatives on the campaign trail Monday, even as his foes accused the Tories of driving Canada into recession by balancing the books through billions in cuts.
As the focus on the economy intensifies during the federal election — with a leaders’ debate on the economy Thursday in Calgary — the three main national parties swiftly put their own spin on the numbers released Monday in the federal government’s annual financial report.
After a string of six consecutive deficits, federal finances are back in the black a year ahead of schedule. The government posted better-than-expected financial results for the 2014-15 fiscal year that ended in March, with the $1.9-billion surplus well ahead of the $2-billion deficit the government had forecast for the year in last April’s budget.
The Conservatives are using the new report on the government’s healthy finances to sell the message that they are the only party that can be trusted to manage Canada’s fragile economy.
The government recently announced a $5-billion surplus for the first three months of the 2015-16 fiscal year (April to June), although about $2.1 billion of that came from the government’s onetime sale of its remaining shares in General Motors.
Harper defended his government’s record, while his political opponents said the balanced budget was the result of billions of dollars in cuts or program expenditures going unspent – known as “lapsed spending” — that they argued actually sank Canada into recession.
$1.9B surplus pushes economy back to top of election agenda
Federal leaders spar over who has best plan to manage public money
(CBC) The Conservative election campaign was buoyed by news today that the government posted a nearly $2-billion surplus for the last fiscal year, but opponents say that was done by squeezing vital services for seniors and veterans.
Former parliamentary budget officer Kevin Page said it’s positive news that the books are back in balance, but said the details on the real source of the surplus won’t be known until the public accounts are tabled in November.
“Did we hold back on spending for veterans? Did we hold back on spending in defence? Did we hold back on spending for food inspection agencies? What’s the impact on service levels?”
CBC News has reported that a number of federal departments have had “lapsed spending”  — money promised but never spent. Among the serial lapsers in a top-seven list compiled by the Privy Council office were departments which failed to spend all their budgeted money for infrastructure and procurement, including National Defence, while Aboriginal Affairs regularly fell short of spending its full budget.
Canada Records Budget Surplus of C$1.9 Billion in Fiscal 2014-15
Spending restraint in public sector helps bring surplus one year ahead of Conservative government’s plan
(WSJ) Canada posted a budget surplus in fiscal 2014-2015, one year ahead of the government’s plan, bolstering Prime Minister Stephen Harper’s efforts to position himself as the best steward of Canada’s economy ahead of an Oct. 19 national election.
1 September
Harper says economy ‘back on track’ as data point to technical recession
Confirmation that Canada experienced a technical recession in the first half of 2015 provided immediate fodder for the federal election campaign, as the opposition condemned the government’s record while the Conservatives said it is good news that the worst is over and the economy is improving.
Tuesday’s Statistics Canada GDP data for June quickly led to a debate between parties over the merits of the Liberal proposal to increase spending on infrastructure, even if it means delaying the return to balanced budgets until 2019.
Jim Stanford: Our economic problems run deeper than brief dips in GDP
With Tuesday’s release of quarterly GDP data, Statistics Canada confirmed that Canada fell into recession in the first half of the year. Canada’s economy (adjusted for inflation) shrank slightly in the spring (for the second quarter in a row), hence meeting economists’ traditional definition of the dreaded “R”-word. It is likely to be short and shallow, a far cry from the global conflagration of 2008-09. But a recession it certainly is. Coming six years into a lacklustre recovery (the weakest since the Second World War), weary Canadians probably question whether the last recession ever really ended.
Not surprisingly, federal Conservatives are scurrying to minimize the political fallout, going as far as redefining the very term. Conservative candidate Jason Kenney argues that a “discrete sectoral downturn” doesn’t really count as a recession. Conservative Leader Stephen Harper claims the downturn is limited to one industry, and that 80 per cent of the economy is “healthy and growing.” (The statistics tell a different story: most of the 20 broad industries tracked by Statistics Canada contracted during the worst months of the downturn.)
The oil slump has thrown Canada back into recession
(Quartz) Another victim of the oil crunch? Canada’s economy.
The country’s GDP shrank at a -0.5% pace last quarter after a -0.8% print in the first, meaning the first Canadian recession since the financial crisis is officially underway.
it’s not like this is a surprise. Vice News detailed in June the toll that falling energy prices were having on Canada’s economy in a June documentary called “Alberta’s Boom Time Hangover.” And when the Bank of Canada cut interest rates in July (pdf), it noted that the oil sector’s faster-than-expected deterioration had caught the central bank somewhat off guard. Still, the BoC remains optimistic that the economy will pull through by year’s end.
28 August
Harper boasts of $5-billion surplus over first quarter
The monthly Fiscal Monitor tracking reports can be highly volatile based on the timing of various government expenses and sources of revenue.
Finance Canada itself cautioned against reading too much into the early figures. The department said Friday that the numbers “provide limited information” with respect to the outlook for the year as a whole. …
Parliamentary Budget Officer Jean-Denis Fréchette issued a report in July that incorporated the Bank of Canada’s numbers. As a result, the PBO said the 2015-16 fiscal year is on track for a $1-billion deficit.
The Liberal Party issued a statement Friday accusing Mr. Harper of blatantly misleading Canadians by promoting a “phony” surplus. The Liberals argue the PBO numbers are more reliable.
Liberal Leader Justin Trudeau announced Thursday that a Liberal government would not balance the budget until 2019 in order to fund $60-billion in new spending on infrastructure in an effort to boost economic growth. The Liberals said this could lead to deficits of no more than $10-billion in each of the next two years. The Conservatives and NDP are both promising balanced budgets.
“I’ve made a choice to be upfront and honest about our economic situation,” said Mr. Trudeau, arguing that now is the time for federal investments in roads, bridges, social housing and public transit. He said Mr. Harper has previously campaigned on balancing the books only to run years of deficits.
Paul Martin says Stephen Harper is the ‘king of deficits’
Paul Martin returned Friday to the Liberal campaign trail to lend credibility to Justin Trudeau’s economic team in Quebec, but for a few moments, people could be forgiven for wondering who was running for prime minister.
The contrast between the seasoned campaigner and the young, telegenic leader was never more apparent than at an event in Martin’s old Montreal riding, now renamed LaSalle-Emard-Verdun.
The former prime minister and finance minister, lionized by Liberals for taming the federal deficit in the 1990s, almost overshadowed Trudeau as he delivered a passionate, articulate denunciation of the Conservative fiscal record.
Martin sharpened a direct appeal to left-leaning voters, made earlier in the week, by accusing the NDP of siding with the Harper government on economic policy.
27 August
Brett House comments: Private sector investment and growth are stalled. We need fiscal stimulus and yes, deficits, to kick start the economy. The problem isn’t deficits…the problem is that the Conservatives cut back on them too quickly and left the economy to stagnate before the private sector was ready to pick up the ball. We can borrow at lower rates than our infrastructure is falling apart and the costs of congestion are rising. In these circumstances, the CPC and NPD commitment to balancing the budget is the least economically responsible thing we could do and the Liberals have got this right
Country bracing for ‘made in Canada’ recession: former chief statistician
(CTV) Statistics Canada will release its gross domestic product figures for June next Tuesday, which will show whether Canada had two consecutive quarters of negative economic growth and, thus, met the technical definition of a recession. Canada has seen five consecutive months of economic decline.
All the money talk comes as the federal leaders spar over how they would handle the country’s economy if elected.
Liberal Leader Justin Trudeau announced Thursday that, if elected, his government would run modest, short-term deficits until 2019 in order to boost the economy. Conservative Leader Stephen Harper slammed the Liberal plan, saying Trudeau’s small deficits would turn into large ones leading to high taxes and program cuts.
Reacting to Trudeau’s plan, Sheikh says it is a good time to run deficits, given the state of the Canadian economy.
3 August
‘Perfect Storm’ Engulfing Canada’s Economy Perfectly Predictable
Years ago Andrew Nikiforuk, citing experts, warned where Stephen Harper’s priorities would lead us.
(The Tyee ) Years ago I warned Canadians and Tyee readers that bitumen would not make us a superpower, or pave our streets with gold.
I detailed the pitfalls of petro-currencies and the economic inequalities bred by dependency on oil exports.
I warned that countries that rely on black gold for revenue generally come to represent the interests of petroleum extractors. Cursed by oil, they become more belligerent and thumb their noses at international institutions.
I explained the Dutch Disease and I warned about the folly of tying a nation’s future to a resource as costly and dirty as bitumen.
I wrote that rapid bitumen expansion would lead to reckless overproduction and reintroduced Canadians to the ghost of Harold Innis.
Innis, our greatest historian, said that Canada had a resource addiction problem: it got hooked on the raw export of trees and rocks to global empires and then went on a mining binge, only to awake with no memory of the destruction and no markets.
31 July
Canadian Wheat Board Sold To G3 Global Grain Group, Becomes G3 Canada
(CP) The federal government has closed the book on the agency that once marketed almost all the grain produced by western Canadian farmers.
Agriculture Minister Gerry Ritz says Ottawa has finalized the sale of the Canadian Wheat Board to G3 Global Grain Group.
“The commercialization of the CWB has been part of the government’s broader modernization of Canada’s grain sector to stimulate investment and create jobs and economic growth for farmers and Canadians,” Ritz said in a release Friday.
The federal government announced in April that G3, which is partly owned by Saudi Arabia, would buy 50.1 per cent of the board for $250 million.
It said the rest would be kept in trust for grain farmers, but in seven years G3 has the option to buy back the units at market value. …
Despite several lawsuits and vocal opposition from some farmers, the federal government went ahead three years ago with a long-standing promise to abolish the monopoly.
A group called Friends of the Canadian Wheat Board hasn’t given up the fight.
Canada in ‘mild recession’ after economy shrinks five months in a row
But most economists agree brighter times are around the corner, with the economy moving past the negative effects of a host of temporary factors, ranging from bad weather to plant closings to wild fires. Increased spending for the coming federal election, the recent $3-billion payout in government childcare benefits and the continuing low run of the loonie are expected to provide stimulus.
28 July
Canada is not in a recession, influential group of economists says
The Business Cycle Council, an arm of think-tank the C.D. Howe Institute, said Tuesday that there’s no evidence that Canada’s economy has slipped into recession in any of the ways that people typically associate with the term.
Canada not in recession despite report, Joe Oliver says
Although it falls under the umbrella of C.D. Howe, the council’s “views collectively expressed do not represent those of any institution or client,” the group said in a release Tuesday.
23 July
Vancouver’s green growth transcends the resource bust
Ian McKay, CEO Vancouver Economic Commission
(Globe & Mail) Our economic strategy has been simple: Take the steps needed to build a resilient economy, one that can withstand the boom-and-bust cycles that are amplified when economies hang their success on a handful of industries. That has meant diversifying our economy and focusing on knowledge-based sectors, such as technology, digital entertainment and interactive, and the green economy. These efforts have paid off, as our economy is now one of the most diverse of any major city in North America, and these sectors are the city’s fastest-growing.
21 July
The Conservatives Have Steered Canada Into a Preventable Recession
Jerry Dias, National President Unifor
(HuffPost) Only recently Prime Minister Stephen Harper boasted that Canada’s economy was “the envy of the entire world.” That claim was always overstated. Now it is downright ludicrous.
The Bank of Canada cut interest rates for the second time this year, but few expect this to pull us out of the tailspin. After all, Canadians are already tapped out: household debt now exceeds 165 per cent of disposable income. And businesses are more reluctant to invest than ever — despite expensive corporate tax cuts that drain $15 billion per year from the federal treasury. Without a strong willingness to borrow on the part of consumers or businesses, cutting interest rates is like pushing on a string.
So we must look to government for a more effective response to the recession. Unfortunately, however, that looks like another policy dead-end. Because so far the response of federal Conservatives has been as ineffectual as it is predictable: deny, point fingers, and spread fear.
18 July
Tzeporah Berman: It’s time to talk about the oilsands
(TorStar) Evolving beyond our fossil fuel economy will require serious transition planning. It won’t be easy or comfortable, but messy and complicated.
It’s time to recognize that the oilsands are, in fact, a technological marvel that took great Canadian ingenuity and acumen. It’s also time to acknowledge that when we began the exploration of the oilsands we did not know what we know today.
We didn’t understand the cumulative impacts on our disappearing caribou populations, the toxic impact on our lakes and fish, the human health impacts of air and water pollution. We didn’t know that carbon trapped in our atmosphere would create climate impacts as severe as we currently face – the droughts, the floods, the wildfires, the rising intensity and frequency of violent storms. Now we do.
Yes many of us still use gasoline to fill our cars, we fly in planes and we will continue to for many years. We need to recognize that that will not change overnight and the oilsands will not shut down tomorrow. There is a long and difficult road in front of us of retraining, of building new clean energy infrastructure, reducing oil demand through efficiency, scaling up public transportation and electrifying transport.
That will take time and we need to ensure that people are not thrown out of work and we do not destabilize capital markets. That requires serious transition planning and it’s not going to be easy or comfortable. It is in fact going to be messy and complicated.
15 July
How Canada’s economy went from boom to recession so fast
An in-depth look at the perfect storm that pushed Canada into recession
(Maclean’s) Now, the debate is how long and deep Canada’s downturn could be. And yet, with an election on the horizon, Ottawa seems in denial. Earlier this month, federal Finance Minister Joe Oliver told reporters the economy “was not in a recession,” while Prime Minister Stephen Harper later blamed any slowdown on overseas events beyond Canada’s control, declining to elaborate on just how Canada allowed itself to become so exposed in the first place. The hope continues to be, as it has since commodity prices began to tumble, that the U.S. economy will fuel our rebound—except that, so far, that’s not happened either. For deep structural reasons, Canadian manufacturing has been slow to recover, despite a weakening loonie making our exports, at least in theory, more attractive. To top it all off, last week the International Monetary Fund cut America’s growth forecast for 2015, while also slashing its outlook for Canada.
In just a few short years, Canada went from being one of the developed world’s most resilient economies to among the most vulnerable. And, unfortunately for heavily indebted Canadians, there are plenty of storms gathering in faraway places that threaten to push us under.
Bank of Canada cuts key rate as economy contracts, exports stall
Stephen Poloz is refusing to call it a recession, but the Bank of Canada Governor says the country needs another jolt of interest rate relief as the economy shrinks and exports stall.
The central bank lowered its trend-setting overnight rate a quarter percentage point Wednesday to 0.50 per cent … The central bank also slashed its forecast for the Canadian economy, acknowledging for the first time that gross domestic product will likely decline in both the first and second quarters. And the bank said growth for the full year will reach just 1.1 per cent, a major downgrade from the nearly 2 per cent it was predicting just three months ago.
3 June
OECD slashes Canada’s economic forecast for 2015, but gives hope of growth to come
(Financial Post) After what’s been called an “atrocious” start to the year, Canada’s economy is expected to climb back into positive territory through the rest of 2015 — and keep on growing next year.
To do that, consumer spending will need to continue providing a solid base for expansion — through strong demand for housing and other purchases — along with the anticipated resurgence in the U.S. economy, which should help lift exports that are also benefitting from a low Canadian dollar.
1 June
Joe Oliver has some explaining to do after energy crunch takes bigger bite of economy than expected
When Oliver tabled his 2015-16 budget on April 21, the oil-price implosion was flagged as the main threat to Ottawa’s long-promised goal of balancing the books, with a good chunk of change to spare — in the form of a $1.4-billion surplus.
Not to worry, he said at the time, we also have a cushion — a $1-billion “adjustment for risk” — set aside in the government’s contingency fund just in case all doesn’t go as planned.
It hasn’t. The energy crunch is taking a bigger and longer bite out of the economy than Oliver — or anyone, really — had foreseen only a half-dozen weeks ago
26 May
America taking notice of Fraser Institute’s “misleading” research
(Press Progress) The Fraser Institute has made another international headline for all the wrong reasons. One of America’s top news sites has called out the right-wing think tank for “misleading” research based on a “fallacy.” A new CNBC story slams the methodology used in the Fraser Institute’s recent report on Canadian household debt. Statistics Canada shows the country’s average household debt has grown considerably in recent years. But the Fraser Institute described it as “not excessive” and called concern over the issue “overblown.”
22 April
Andrew Coyne: Tory budget proposes big government that lives within its means
The “national aerospace supplier development initiative,” the expanded mandates for the wholly superfluous Business Development Bank of Canada and Export Development Canada, the ludicrous “Defence Procurement Strategy” — if anyone was in any doubt that this government has no interest in free markets, they need look no further. And I haven’t even mentioned the proposal, still unrepudiated, to regulate every price in Canada into line with its U.S. counterpart.
This sort of meddling in the corporate sector is mirrored by the government’s determined efforts at social engineering on the personal side. The doubling of the children’s fitness tax credit, announced last fall, is only the most overtly foolish. But now brace yourselves for the doubling of the lifetime capital gains exemption for farmers and fishermen, and the reduction in the already heavily discounted small business tax rate: measures that are both distortionary and, given the income bracket of the typical beneficiary, regressive.
Kelly McParland: Harper continues to bamboozle opposition with his instinct for the pocketbook
The opposition parties kept insisting Oliver’s budget was designed for “the wealthiest Canadians.” Once again, said Thomas Mulcair – or maybe it was Justin Trudeau – Stephen Harper is taking money from the middle classes and giving it to “the wealthiest Canadians.”
That’s the first part of the conundrum. Here’s the second: after complaining about the prime minister’s determination to further enrich the tiny population of very wealthy Canadians, the two opposition leaders then denounced the budget as a political document. That is, it was written solely to win votes in the October election. So that’s what made me wonder: if this is in fact a document that steals from the masses to hand to the lucky few, why would anyone expect it to be popular? If it’s so unfair and one-sided, why do Trudeau and Mulcair assume Canadians will vote for it in droves?
15 April
Stephen Poloz’s economic optimism is built on a shaky foundation
In his news conference following Wednesday’s release of the Bank of Canada’s quarterly Monetary Policy Report, a couple of reporters took a run at getting the central bank’s governor to repeat his damning one-word assessment [“atrocious”] of the economy’s first-quarter performance … Mr. Poloz wouldn’t bite.
… the Bank of Canada is ready to get past the recently ended first quarter and to look to the future – which it insists was made that much brighter by the darkness of the first three months of the year.This has been the bank’s script for a while now: The first quarter would bear the brunt of the oil hit, clearing the way for a rebound in the second and beyond, as the oil shock fades and other drivers, chiefly non-energy exports, take over. The stagnant first-quarter estimate takes care of the first part of the plan. But the second part remains far from certain.
Water-poor Saudi Arabia invests in Canadian Wheat Board’s grain
Canadian Wheat Board to be sold to Saudi-owned Global Grain Group
CWB has been buying and building grain terminals, and says the new investment will help it expand across the country.
(Global)The federal government is privatizing the Canadian Wheat Board with a sale to a Saudi-owned company
6 April
Economic hit spreads beyond oil patch: Bank of Canada
(Globe & Mail ROB) The hit to jobs and investment from the oil price plunge is spreading beyond the oil patch, according to businesses surveyed by the Bank of Canada.
Over the next 12 months, fewer companies expect to invest in machinery and equipment, to expand sales or to hire.
Hiring intentions were weaker than they’ve been since the recession in 2009, and the problem is evident in “most sectors and regions,” the bank said. Many businesses tied directly the oil industry plan to cut their work force, although overall hiring intentions remain positive across the country.
Business conditions are worst in the energy sector, but the survey found evidence of “some spillovers” to companies in the energy supply chain and through unspecified “indirect effects.”
The mood isn’t all bad. Businesses outside of the oil sector said they are starting to see the benefits of the lower Canadian dollar, but they “expect the benefits to unfold only gradually in the future.”
2 April
What happened when Canada stopped counting its numbers
When a major Western country stops counting its numbers, bad things can happen.
(Al Jazeera America) In June 2010, the Canadian government unveiled a grand experiment in data collection. In the name of privacy, Prime Minister Stephen Harper ended the mandatory long-form census for the country and swapped it out with a voluntary survey.
Five years later, there is a mass scramble to make sense of a rapidly changing country. Despite an explosion of corporate data-mining in most nations, researchers interested in tracking poverty, immigration and public health in Canada know less and less about the country as time progresses. They’re not, for example, entirely sure if income inequality is accelerating, stagnant or closing. Across the nation there is a loud, collective uneasiness among them.
27 March
Why Canada’s economy is headed off the cliff
(PBS Making Sen$e) Canada is in the midst of an unprecedented housing boom that seems likely to bust. I was recently in Canada and noticed a schizophrenic oscillation between housing exuberance and oil-price despair. What did it mean for the Canadian economy’s outlook? Upon returning to the U.S., I did some research. What I found leads me to the conclusion that Canada is now among the most vulnerable large economies in the world.
20 March
Although these remarks are aimed at the U.S., they are equally applicable to the Canadian economy:
Lawrence H. Summers: ‘There are many ways of burdening our future’
I yield to nobody in my concern for my children’s generation and my children’s children’s generation. There are many ways of burdening the future. One is to borrow money – though, given how low interest rates are, those burdens aren’t that great. Another is to defer maintenance. Those costs accumulate at a much greater rate, and that’s why I think infrastructure investment is so very important. Another way to burden future generations is to scrimp on education. Another way is to fail to invest in basic scientific research. Another way is to saddle them with huge pension liabilities for those who are working, serving the public today. We are doing all those things. And so, a more rational set of policies that raise the growth rate and leave them 20-per-cent richer than they would otherwise be is by far the most important thing we can do for future generations.
18 March
Complete shift to renewable energy within Canada’s reach, academics say
Canada could shift entirely to renewable sources of electricity by 2035 and eliminate 80 per cent of its greenhouse gas emissions by mid-century, says a group of Canadian academics that is aiming to spur government action on climate change.
In a 56-page policy document scheduled for release on Wednesday, more than 70 scientists, engineers and economists say Canada is in a more favourable position than most countries for a switch to renewable power, including large-scale hydroelectric. The most significant barrier is not technical or economic, but a lack of political will, they said.
To get there, they recommend a national carbon-pricing plan, and greater effort to move electricity produced from low-carbon sources such as hydro dams across provincial borders.
McGill economist Christopher Ragan said implementing a carbon pricing scheme, as the plan advocates, would produce revenue that could be used to reduce corporate and personal taxes.
“You could end up stimulating growth, not retarding it,” said Dr. Ragan, who chairs a separate effort, known as the EcoFiscal Commission, that also advocates putting a price on pollution.
Co-operation on energy should be continental priority
The North American energy revolution is underway. Fuelled by energy self-sufficiency, Canada, the United States and Mexico can create an economic powerhouse that will rival any other regional bloc and guarantee continental sustainable prosperity.
This past weekend, scientists, environmentalists, energy industry representatives and government officials from all three nations met in Beaver Creek, Colo., for the annual Vail Global Energy Forum.
24 February
Crude Awakening: How the Keystone Veto Dashes Canada’s ‘Superpower’ Dreams
(Rolling Stone)) Canada has benefited from Harper’s oil boom — though less than you might imagine. In a quirk of Canadian law, the federal government collects no oil royalties. Its fortunes rise, indirectly, from oil, benefiting only from GDP growth and the surge in corporate and payroll taxes. The province of Alberta does collect oil royalties: C$5.2 billion last year alone. But far from socking that money away in a sovereign wealth fund — as Norway has done, amassing a portfolio worth more than $800 billion — the province has pissed it away on tax cuts. In 2001, Alberta instituted a flat tax of just 10 percent. To keep the working class on board, Alberta’s government eliminated health care premiums for the province’s version of Canada’s national health care. Ever since — notwithstanding years of inflated oil prices — the province has bled red ink and has no financial reserves to cushion the crash.
Reminder: Should governments siphon off profits from massive oil and gas reserves and invest them for the long term? Or should they let the free market grip it and rip it, and keep taxes and regulations to a minimum? Alberta and Norway provide two strikingly different answers to those questions (Why every Norwegian is a (kroner) millionaire)
6 February
Stormy skies: Bombardier flies a risky flight path
The Montreal-based transportation giant is facing one of the biggest challenges in its 73-year history. Under attack by global competitors and slowed by its own missteps, Bombardier is being forced to re-engineer its business and fend off a brewing cash crunch.
The company has already discontinued a key business jet under development as it focuses resources and cash on priority programs such as the C Series airliner. But with increased focus comes increased risk, and investors see plenty. Bombardier’s shares have plunged to levels seen two decades ago, and confidence in the company’s prospects for a quick turnaround is slipping.
“There’s just too many question marks in my mind to feel comfortable” adding to our position, said Manash Goswami, a fund manager for First Asset in Toronto, which holds Bombardier shares.
“There’s just so much uncertainty.”
28 January
Terence Corcoran: The Canadian economy: Nobody saw it coming
(Financial Post) Sometimes it looks like the Canadian economy is unraveling like a giant surprise package right in the face of economists and the Bank of Canada. We’ve got big data revisions, shock bank rate cuts, a falling Canadian dollar. Through it all, nobody saw it coming. They didn’t see a thing.
Statistics Canada’s labour force data are notoriously wonky and revision prone. Still, Wednesday’s revamp wiped out 50,000 jobs that economists had assumed had been created during 2014. In an economy with almost 20 million employed, the revisions are small, but they cast doubt on the state of the economy and the outlook for 2015. Institutional economists who did not see it coming now see the labour data as a sure sign the Bank of Canada will lower interest rates again in March.
22 January
Analysis | Federal budget 2015: Economists making it difficult for Joe Oliver
Bank of Canada latest to warn anticipated surplus could sink with oil
The government has promised to:
Balance the budget this year.
Provide huge tax cuts to families and others.
Make no further cuts to the services Canadians receive.
Harper’s voice can already be heard on some radio station commercials saying his is the only party that will “put more money in the pockets of every Canadian family with children.”
The ads don’t mention whether or not that money is going to keep the country in deficit, and therefore being borrowed from the very same children.
21 January

Bank of Canada shocks markets with cut in key interest rate
Central bank sees 2015 economic growth of 2.1%, down from earlier forecast of 2.4%

(Financial Post) The Bank of Canada became the first central bank in the Group of Seven to cut interest rates in response to plummeting oil prices, saying the shock will weigh on everything from inflation to business spending. The bank cut its rate on overnight loans between commercial banks by a quarter point to 0.75%, a decision none of the 22 economists in a Bloomberg News survey predicted.
19 January
4 Tory tall tales from Jason Kenney
(Press Progress) Employment Minister Jason Kenney is quite the storyteller.
Or so he proved while making the rounds on the Sunday morning national TV circuit.
1. Canada is on pace to be the “first developed economy in the world” to balance its budget
2. Our $3 billion “contingency” fund is now a $3 billion “natural disaster” fund
3. The Conservatives have been able to “significantly increase spending” on Health care?
4. Carbon taxes for everyone!
16 January
Target comes to Canada, ruins thousands of lives, goes back to America
On Thursday, Target Canada announced it would “discontinue Canadian operations” and shut down all 133 Canadian stores. The move comes only two short years after coming to Canada and buying the leases to over 200 Zellers stores.
The demise of Target Canada means all 17,600 people employed by the company will lose their jobs. (For more on Target’s labour views, see the video below).
Those losses come in addition to 27,300 former Zellers employees who lost their jobs after the original transaction, despite Target promising them a first crack at new jobs (only 1% of ex-Zellers employees ended up with jobs at Target) — all because Target preferred “starting fresh with newly hired staff – and no union,” as the Globe and Mail put it at the time.
15 January
Federal budget delayed until at least April, spring election unlikely
A day after Oliver said the government’s surplus projection for 2015-16 factored in falling oil prices, the minister said Thursday he needs more time to determine what tumbling crude and growing economic headwinds mean for Canada before he can deliver the federal budget.
“Given the current market instability, I will not bring forward our budget earlier than April,” Oliver said in his prepared speech Thursday to the Calgary Chamber of Commerce. “We need all the information we can obtain before finalizing our decisions.”
The Conservative government is projecting a $1.6-billion surplus in 2015-16, but that was based on North American benchmark West Texas Intermediate (WTI) oil averaging $81 US over the next few years. Oil prices have now plunged below $50 US. The federal government does, however, have a $3-billion contingency fund factored each year into its budgeting, which could be needed to balance the books in 2015-16.
Retail giant Target’s pullout of Canada — and the 17,600 lost jobs that go with it — is the latest economic headache for a Tory government grappling with cratering oil prices and eroding federal revenues in an election year.
14 January
6 ways crashing oil prices could shake up Canada’s economy
(Press Progress) Falling oil prices are a potential game changer for Canada.
From real estate to renewable energy, from tax policy to the manufacturing sector, we could see a whole new country.
The experts aren’t certain if (or when) oil prices will recover.
Of course, this volatility shouldn’t come as a surprise. We’ve been warned for years that Canada’s natural resource boom was built on shaky ground, with critics pointing to “unbalanced” growth backed by “policies around oilsands expansion” that “show a lack of economic foresight that may ultimately limit Canada’s long-term competitiveness.”
13 January
Suncor cuts 1,000 jobs, takes $1-billion out of 2015 budget
Suncor Energy Inc. has slashed $1-billion from its 2015 budget and will cut roughly 1,000 jobs as it delays a major oil sands project, accelerating the industry’s slowdown amid plunging oil prices.
(Globe & Mail) Canada’s biggest energy company is holding off on its MacKay River 2 expansion plan in the oil sands, Suncor said Tuesday. The project was scheduled to reach first production in 2017, but will now be delayed by at least a year. Suncor will also pull back on the White Rose expansion effort off Newfoundland and Labrador’s coast. It was expected to produce oil in 2018, and it, too, will be delayed by at least a year.
12 January
Pension plans push back over ‘unbelievable’ new powers for regulator
(Globe & Mail) Three of Canada’s largest pension fund managers are protesting powerful new legislation that would include pension plans among the key financial players to be governed by a new regulator overseeing systemic risks in Canada’s capital markets.
The three pension plans, all representing public sector workers in Ontario, argue it is unnecessary and even inappropriate to bring pension plans under the supervision of a proposed new national securities regulator in Canada, which is being given expanded authority to oversee so-called systemic risks that can threaten the stability of Canada’s stock markets.
The act is one of two new pieces of legislation published together in September that would create a new federal-provincial securities regulator, and separately create a new national systemic risk oversight regime to be managed by the regulator. Public comments on both acts were due in December, but the legislation is still under review.
The systemic risk legislation is aimed at key organizations involved in Canada’s capital markets, including stock exchanges, clearing houses, credit rating organizations, brokerage firms, investment funds and pension funds.
The regulator would have powers to designate an organization as “systemically important” if its activities could pose a systemic risk to the markets based on a variety of criteria, including its size, the volume of trading it conducts, the extent of its “interdependencies” in the market and the complexity of its business.
With approval from the federal finance minister, the regulator would have the power to require systemically important organizations to sell securities, increase capital or financial resources, abandon proposed mergers, implement wind-up plans, terminate business activities or “to do anything else that is necessary to address the risk.”
Coyne: If you build a national securities regulator, will everyone co-operate?
There is a maxim, first formulated by the English journalist John Rentoul, that the answer to any question posed in a headline (Is China More Democratic Than the West?) is invariably: no. … Thus, we pass onto a headline that appeared in the Financial Post to start the week: Is National Securities Regulator in Cards? The online version was a little more grammatical: Will 2015 Finally be the Year of the National Securities Regulator?” But the answer in either case is almost certainly the same: Why, no, actually.