Canada economy 2017 (Part 2) – 2020

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Canada’s top pension funds issue rare joint call for better ESG disclosures
The heads of Canada’s eight largest pension funds, collectively responsible for $1.6-trillion in assets, are banding together for a rare joint request, pleading with corporations to beef up their environmental, social and governance disclosures by reporting the data in a standardized fashion.
ESG factors, such as diversity initiatives and carbon footprint disclosures, have become crucial investment criteria for institutional money managers in recent years, but the way in which companies report these risks and commitments is akin to the Wild West.
To streamline decision-making, Canadian pension fund chief executive officers have worked for the past six months to mutually agree on the best frameworks for companies to use – those from the Sustainability Accounting Standards Board and the Task Force on Climate-related Financial Disclosures.
The leaders backing the initiative include the CEOs of Canada Pension Plan Investment Board, the Caisse de dépôt et placement du Québec, Ontario Teachers’ Pension Plan and PSP Investments, which manages the pensions of federal government employees and the Royal Canadian Mounted Police.
Many of the funds have already been vocal about improving ESG disclosure, but the joint request marks the first time all eight have come together.

29 June
Report: Building Back Better with a Bold Green Recovery
By Ralph Torrie Céline Bak and Toby Heaps
(Corporate Knights) The Building Back Better plan set out in this report is a synthesis of seven white papers published between April 22 and June 3 . Our plan makes it clear that governments have a unique opportunity today to boost economic growth, create millions of new jobs and position Canadian businesses as suppliers rather than buyers in tomorrow’s economy.
This document, put together with input from more than 100 of Canada’s most inspired minds, outlines a series of investments that the federal government could make to set Canada on a path to a resilient, net-zero economic recovery. The areas for investment for the Building Back Better Canada Plan include the following programs:
deep retrofits of homes and workplaces
accelerated electric vehicle (EV) uptake
support for active mobility (e.g. walking and biking)
greening of the electricity grid
decarbonizing of heavy industry
nature-based climate solutions for our forests and farmland, and
making Canada a leading supplier of EV components and zero-carbon natural resources.

Report: Building Back Better with a Bold Green Recovery
Illustration by Tallulah Fontaine

4 July
Aaron Wherry: Walking a ‘tightrope’: Bill Morneau and the path out of the pandemic economy
Turning out the lights on much of Canada’s economy was easy compared to what comes next
(CBC) Finance Minister Bill Morneau has, in the space of a few months, approved the spending of nearly $200 billion in federal aid in a deliberate effort to shut down huge portions of Canadian society so that a contagious disease could be contained. Whole new programs have been created and adjusted in a fraction of the time normally required for governments to design and implement new initiatives.
While the virus still poses a threat, the goal of governments now is to restart the economy — or at least as much of it as can be safely restarted. Then, at some later date, it will be time to repair and rebuild.
Changes to Employment Insurance were followed by the creation of two new benefits to help those who couldn’t work. A week later, those two benefits were subsumed by the new Canada Emergency Response Benefit. A wage subsidy to cover 10 per cent of an employee’s earnings was introduced. Widely criticized as too modest, the wage subsidy was subsequently increased to 75 per cent.
Both the CERB and the Canadian Emergency Wage Subsidy required the design of entirely new systems to deliver the funding.
In its most recent report to the House of Commons finance committee, the government listed 51 initiatives totalling $174 billion in direct supports for individuals and businesses.
All along, there were complaints that the Liberals weren’t moving fast enough or far enough. In April, the Globe and Mail reported grumbles from within government that the Department of Finance had been slow to meet the moment.
“I think when we look back five or ten years from now at the story of the pandemic response, I think the story will be that we acted in scale and with speed that was unfathomable for governments prior to this pandemic,” Morneau said.

31 May
Engineering a ‘green recovery’ is a terrible idea
Christopher Ragan and Andrew Potter
(Globe & Mail) Based on what we are hearing from Ottawa, there will soon be a massive stimulus package aimed at restarting the economy – and it will be dominated by the Liberal Party’s climate-change agenda. Three cabinet ministers assigned to work on the stimulus package are Catherine McKenna, Jonathan Wilkinson and Steven Guilbeault – the past, present, and (likely) future ministers of environment and climate change.
This is a terrible idea, for three reasons. First, it is not clear that a conventional package of stimulus policies is at all appropriate. We aren’t living through a normal economic recession, in which private firms and households need to be induced by government fiscal and monetary policies to produce and spend.
Second, even if conventional stimulus policies were needed, is engineering a “green recovery” such a good idea? If spending massively on green infrastructure is a good idea today, then surely it was a good idea six months ago. But is this true? If the government had come into a windfall of tens of billions of dollars back in 2019, would its best use have been to spend it on dozens of green infrastructure projects or low-carbon subsidies or tax credits for green investments?
The answer is no, mostly because such policies are just more examples of the government trying to pick winners in the marketplace. Governments do this all the time, but it doesn’t change the fact that they are terrible at it. In general, governments don’t know which technologies will most cost-effectively reduce GHG emissions in the building sector, or the best way for auto companies to redesign their products to reduce emissions. They don’t know how cement makers should alter their production techniques to reduce their carbon footprint, or what will make households take the plunge and switch to electric vehicles. And there is plenty of evidence that policies that try to micromanage behaviour and promote specific technologies tend to achieve their environmental objectives only at very high costs.
This brings us to the third reason, and to the better alternative. The government’s inability to pick winners in the marketplace is precisely why the preferred climate policy for almost all economists is to steadily increase the carbon tax on the GHG emissions that we know to be harmful and let the market forces do the rest.
Make Covid-19 recovery green, say [UK} business leaders
(BBC) More than 200 top UK firms and investors are calling on the government to deliver a Covid-19 recovery plan that prioritises the environment.
They say efforts to repair the economy should support the government’s commitment to tackle the climate change crisis.
They believe ministers should use the Covid-19 lockdown as a springboard to propel a green economy.

21 May
Poloz rejects ‘dire’ forecasts, says economy will rebound quickly
(Globe & Mail) “Where we are today suggests we’re still tracking to our best-case scenario … not the ‘dire’ scenario. I know a lot of people don’t want to subscribe to it, because they fear a worse scenario.”
He was referring to the two scenarios for an economic recovery that the central bank outlined in its quarterly Monetary Policy Report last month. The bank’s base case is a relatively optimistic one that the economy will rebound fairly sharply and quickly in the second half of the year. The pessimistic case – which Mr. Poloz has often referred to as the “dire” scenario – envisions more prolonged containment measures or a second wave of shutdowns that would inflict deeper and more lasting damage on the economy.

23 April
Emergency Student Benefit gets a failing grade – just make the CERB universal
Student-specific CESB brings bureaucratic headaches, inefficient splintering of support programs

19 April
Using Canadian workers on farms not feasible, says farm group

10 March
Crude price plummet raises spectre of spending cuts, job losses in Canadian oilpatch
Plunging oil prices landed with a giant thud in Canada on Monday, sending tremors across the oilpatch and raising the spectre of spending cuts, production cuts and job cuts.
The collapse was triggered by a severe double whammy — fears the spread of COVID-19 could trigger a global recession and an oil price war between Saudi Arabia and Russia.
Now, the country’s oil and gas sector — like others worldwide — is weighing the fallout and trying to assess the potential repercussions if prices stay this low for months to come.
The energy sector accounts for more than 11 per cent of Canada’s gross domestic product.

21 February
Choke point: How the blockade movement has sent tremors across Canada’s economy and beyond
What started as a protest in a remote part of Western Canada has flared into a crisis that is wreaking havoc as far away as Halifax
(National Post) …the blockade is raising fresh questions about how easily a small group of protesters in a remote part of Western Canada have been able to paralyze the country’s economy, and highlighting concerns about the vulnerability of the country’s infrastructure and its reputation in the world as a reliable economic partner even if the short-term economic fallout is small.
Douglas Porter, chief economist at BMO Financial Group, said the blockades could pose longer-term damages, but it’s difficult to quantify the exact impacts of a rail stoppage.
“I do have to wonder if it will do some lasting damage to Canada’s brand, especially if this is not a one-off event,” he said.
Rail blockades causing containers to pile up at Canadian ports
Containers sitting idle at major import hubs of Vancouver, Montreal and Halifax
(CBC) A rail blockade in eastern Ontario has led to backlogs at Canada’s three biggest ports, prompting some shippers to take their business elsewhere as cargo piles up and dockworkers’ paycheques shrink.
Atlantic Container Line (ACL), a major U.S. shipping line, is diverting from the Port of Halifax in favour of U.S. harbours. The company, which typically berths two ships a week, is now docking in New York and Baltimore to run cargo inland on American railroads, chief executive Andrew Abbott said.
The blockade disrupts business for everyone from stevedores to truckers, packers, importers, exporters and the ports and railways themselves.
The crisis is stranding an estimated $425 million in goods every day, according to the Canadian Manufacturers and Exporters trade group.

17 January
Linda McQuaig on how privatization is impoverishing the public in Canada
(CBC Radio The Sunday Edition) In her latest book, The Sport and Prey of Capitalists: How the Rich Are Stealing Canada’s Public Wealth, McQuaig argues that Canada was built by massive public investment in railways, energy, medicare and public spaces — and that in the last 25 years, governments have been on a privatization crusade.
“I’m trying to make Canadians aware of this wonderful history we have. The United States excels at private enterprise. We excel at public enterprise. But we don’t know those stories,” she told The Sunday Edition’s Michael Enright.
Contrary to prevailing political and economic opinion, McQuaig believes Canada should be expanding — not shrinking — publicly-funded projects. Urgently.

3 January
Scotiabank sees two Bank of Canada rate cuts in the first half of 2020
(BNN Bloomberg) Bank of Canada Governor Stephen Poloz has been sticking to the sidelines, leaving rates on hold and bucking the easing trend sweeping much of the western world. For more on this and why he expects the Bank of Canada will be forced into action with a pair of cuts in the front half of 2020, BNN Bloomberg spoke with Brett House, vice-president and deputy chief economist at Scotiabank.


The Future Is Canada—and It’s Open for Business
(Wired) The vision and hard work of generations of trailblazers have led Canada to become an internationally known destination for tech. The Canadian government stands fully behind its researchers and innovators, and today they’re leading the pack. Canada now has ownership of the global AI race and is the first country to have a national AI strategy. With no fewer than 500 global AI firms making their home there, artificial intelligence is only one aspect of Canada’s new tech dominance. Last year, the government launched a supercluster initiative, setting aside hundreds of millions for five industry clusters in areas as diverse as augmented reality and advanced manufacturing. This has created an environment in which experts, businesses, universities, and nonprofits have come together in the service of international problem-solving. As a result, Canada has fully emerged onto the tech stage.
More than 39,000 IT companies have sprouted up throughout the country to bring in $181 billion annually. The country’s culture and government foster and support the kind of research and collaboration that attract innovators to multiple regions and industries. For all these reasons, top execs are coming to think of Canada as a world leader in all that technology can mean, now and into the future. (April 2019)

16 December
Morneau’s fiscal update shows Canada’s deficit increased by billions for next 2 years
(Global news) Canada’s federal budget deficit will be billions of dollars deeper than it was supposed to be this year and next, the Finance Department says, as the Liberals promise to keep spending to keep the economy humming.
The question is how much more of that spending the treasury can handle.
The figures released Monday morning show that the Liberals’ projected deficit of $19.8 billion for this fiscal year, a 12-month period ending in March, is now slated to hit $26.6 billion. And next year’s deficit is expected to be $28.1 billion, before accounting for promises the Liberals will unveil in their 2020 budget.
But the Liberals’ preferred measure of the state of federal finances isn’t raw dollars but the debt-to-GDP ratio, which calculates the deficit relative to the size of the economy. The latest projections say that figure will keep improving, if not as quickly as it was supposed to.

9 December
Feds will give update on state of the economy before Christmas, Morneau says

25 November
New cabinet must make the best of an uncertain economic outlook: Don Pittis
Market indicators turn optimistic on global economy but others say, ‘Hold on’
(CBC) According to those trying hard to understand what markets are telling us about the economy, “not as bad as feared” is the new global watchword.
While the best of the economic recovery following the 2008 collapse may be over, the most stirring part of the analysis, should you choose to accept it, is that the long-awaited recession has been postponed.
As Canada’s new cabinet takes the reins this week, their job will be to make the best of what even the optimists foresee as an uninspiring global economy in the coming year.
The job of the new government and its economic ministers will be to use their weakened power as a minority to nudge the country away from crises. And despite a list of problems awaiting attention, including most immediately a rail strike that if left unresolved will soon begin to do long-term damage in numerous sectors, the country continues to have many, if poorly distributed, advantages.
But however Canada deals with its internal problems it must do so in the context of a global economy that continues to struggle.
The CN strike and our ensuing winter of discontent
By Melanie Paradis, director at McMillan Vantage Policy Group.
With a new minority Parliament and a Senate in disarray, an inability or unwillingness to act could trigger Canada’s own Winter of Discontent.
(Globe & Mail) Today, an emergency propane shortage is threatening Quebeckers with cold December weather just around the corner. Elsewhere in the country, oil, grain, construction materials and other goods shipped by rail are slowly stopping. So too, will the flow of billions of dollars within our country’s economy. Reports indicate that within a week, Canada’s GDP could take a $2-billion hit. By the time MPs return to Ottawa on Dec. 5, that could increase to $3-billion.
Put into everyday terms, this disruption could quickly affect a wide range of sectors and regions across the country. Construction sites in Toronto may have to halt work for lack of materials. Agricultural products in the Prairies could go bad sitting in depots. Mining jobs in northern communities could feel the effects of stockpiles of minerals unable to get to market. Chemical jobs in Sarnia, Ont., could be pinched, and across Canada, gas prices could increase as supply becomes limited.
Many Canadians may not immediately understand the sweeping ramifications of the CN rail shutdown, but if it continues, they soon will.

23 November
Oil, Wheat Shipments Grind to Halt and Imperil Canada’s Economy
Export shipments grind to a halt, stunting already weak growth
Fallout may chop quarter point off 4Q GDP in under three weeks

(Bloomberg) This week, thousands of workers at Canada’s largest rail company walked off the job in one of the largest nationwide labor strikes in recent memory. Shipments of exports like wheat, crude oil and aluminum — largely from its inland prairies and bound for the U.S. and the world — are grinding to a halt. Freight traffic has clogged up at the border. And shortages of propane risk leaving thousands in the two largest provinces without heat.
While the dispute itself, over working conditions and benefits for some 3,200 conductors and yard operators at Canadian National Railway Co., might sound like a local affair, the economic fallout is anything but. The five-day-old strike could shave off a quarter-point from growth this quarter if it lasts through Dec. 5, when lawmakers, who have the power to break the impasse, return from a hiatus. That’s considerable considering economists see Canada expanding at just a 1.3% annual rate during the period.

21 November
Bank of Canada’s Poloz says lack of interprovincial trade is ‘absurd’
Bank of Canada Governor Stephen Poloz has criticized barriers that continue to hamper interprovincial trade, saying the lack of free trade among Canada’s provinces is “absurd.”
“That was the reason Confederation happened – to create a free-trade area,” Mr. Poloz said during an armchair chat at an Ontario Securities Commission conference in Toronto on Thursday. “We spend all our energy renegotiating a free-trade agreement with the United States, but we can’t possibly sit down and figure out how to have free trade within Canada?
“You talk to companies, what does that cost them? It’s absurd.”
Climate change poses risk to financial system, Bank of Canada governor says
Bank of Canada governor Stephen Poloz says the institution is developing new models to try and understand the significant consequences climate change could have on financial stability.
In a discussion about emerging risks in Toronto, Poloz was not asked about climate change by the moderator or the audience but took it upon himself to raise concerns about transition risks as calls for action on climate change increase.

17 October
Canada Continued economic growth in a risky world
(Deloitte Insights) Growth has returned after two quarters, but the pace of expansion will be modest in the months to come and is vulnerable to global risks. This is an opportunity for businesses and executives to consider potential actions should economic conditions shift.
Despite the rocky global environment, the Canadian economy managed to post a stellar quarter of growth, expanding 3.7 percent1 in the second quarter (figure 1). However, most of the strength is related to a rebound from two prior quarters of virtually no growth. Abstracting from the quarterly volatility reveals a more subdued picture, with the trend pace of growth three times slower.
Looking ahead, we expect the Canadian economy to grow around 1.5 percent in the second half of this year, yielding an annual figure of 1.6 percent for 2019. Growth is expected to improve slightly over the subsequent two years, fluctuating around our estimated long-term potential pace of 1.7 percent in 2020 and 2021.

6 September
Canada sees jobs surge in August with 81K new positions
Statistics Canada says that even with the increase the August unemployment rate stayed at 5.7 per cent — near a four-decade low — as more people looked for work.
30 August
Canadian economy expands 3.7% — strongest quarterly growth stretch since 2017
Economy growing at fastest pace in 2 years
June’s numbers mean that for the three months of April to June, Canada’s economy grew at a 3.7 per cent annual pace. That’s better than what economists were expecting, and the fastest pace in more than two years.
For comparison purposes, the U.S. economy is currently growing at a two per cent annual pace, according to the latest data.
A surge in exports is the cause of much of the growth, as household spending actually inched lower. But exports of goods rose 3.7 per cent in the second quarter, following declines in previous two quarters. Exports of services, meanwhile, rose 1.1 per cent.
For the second month in a row, Toronto Raptors playoff run helped boost spending to have impact on GDP

21 May
Andrew Scheer’s economic vision for Canada is right out of 1993
Kevin Carmichael: The words ‘competitiveness,’ ‘innovation,’ ‘productivity,’ and ‘intellectual property’ didn’t appear in Scheer’s recent economic policy speech
(Financial Post) Andrew Scheer’s speech at an event hosted by the Economic Club of Canada in Toronto on May 16 was billed as a big event; the second of five “vision” statements from the man who currently has the best shot at becoming the next prime minister, according to the Canadian Broadcasting Corp.’s poll tracker.
The Conservative leader’s vision of the Canadian economy is stale and nakedly partisan. His prepared remarks consisted of almost 5,000 words: “Trudeau” is mentioned 23 times, “deficit” 10 times, and “oil” nine times; “competitiveness,” “innovation,” “productivity,” and “intellectual property” don’t appear at all.
Scheer mentions in passing the need for “smarter investments in areas like basic research and infrastructure.” And he says that the Canada must become a country of “yes” to investments in technology and infrastructure projects that shorten commutes. (He didn’t elaborate on what that means.) Scheer’s only significant policy ideas related to oil: he said he would create a pan-Canadian “corridor” that would make it easier to build pipelines and string power lines, and he said he would stop oil imports by 2030. “An energy independent Canada would be a Canada firing on all cylinders — across all sectors and regions,” he said. “If the United States can do it, so can we.”
… Scheer might have tried to reach across filter bubbles by acknowledging that balanced budgets, lower taxes, and pipelines aren’t a cure for everything. The innovation economy is based on ideas, therefore education matters more than anything.

16 May
Why the Canada Pension Plan will still be solvent — and then some — when you retire
Where do your contributions go and what will you get out of it?
(CBC) As the Canada Pension Plan Investment Board releases its annual report this week on the billions of dollars it has under management, many Canadians remain unsure about where their own CPP money is and how secure it might be.
Financial advisers say there’s a misconception that the government can dip into the money, as well as unfounded concern about whether it might run out as baby boomers all retire and start drawing their pensions..
The CPPIB manages a huge pot of cash — $392 billion as of the end of March 2019 — with a mandate to invest on behalf of Canadians and keep the CPP sustainable over many generations. The professionally managed investment group has earned an average of 10 per cent a year on that money for the past 10 years.

3 May
Digital economy is bigger than mining, forestry, oil and gas, StatsCan says
886,114 people work in Canada’s digital economy, figure has grown by 37% since 2010
(CBC) That’s one of the main takeaways from a new Statistics Canada report released Friday that looked at the impact of technology-focused parts of the economy that are becoming increasingly important in the country’s overall economic picture.
While it’s not an industry on its own per se, the data agency defines the digital economy as any economic activity that is either affected by or enabling digitization. So the term would include everything from e-commerce to telecommunications, and software to consumer and business services that are provided over the internet. All in all, Statistics Canada calculates that as of 2017, Canada’s digital economy was worth $109.7 billion, or about 5.5 per cent of the entire economy that year.

26 April
Corporate Canada’s Pile of Cash in Offshore Tax Havens Has Hit $353 Billion For the First Time in History
Luxembourg, Barbados and Bermuda are three of Canada’s top five destinations in the world for corporate cash
(Press Progress) After exploding to record levels under Stephen Harper’s Conservative government, the amount of money Corporate Canada is funneling through offshore tax havens has hit a new all-time high.
According to data newly released by Statistics Canada, Canadian corporations held a staggering $353 billion in 12 of the world’s biggest tax haven destinations in 2018.
Toby Sanger, executive director of the watchdog group Canadians for Tax Fairness, says Corporate Canada is gaming the international corporate tax system by shifting profits between shell companies set-up in multiple countries.
“We clearly need tougher both tougher enforcement and tougher laws.”
That’s a growing consensus echoed by many, including Christine Lagarde, the head of the IMF, who recently declared that “the current international corporate tax architecture is fundamentally out of date.”
Tax justice advocates applauded a few early steps taken by the Liberal government to crack down on offshore tax avoidance. Finance Minister Bill Morneau earmarked funds to expand Canada Revenue Agency’s capacity to audit wealthy tax dodgers and CRA later agreed to release data that would allow for the first ever estimate of the size of Canada’s tax gap — how much money Canada is owed in unpaid taxes.
The end-results have been a little underwhelming, however.

19 March
Chris Hall: An unusually eventful budget day sets the stage for the coming election
(CBC) Bill Morneau’s fourth budget is in the books, and that’s a good thing since he didn’t get a chance to deliver his speech in the Commons on Tuesday because of the din made by Conservative MPs determined to keep the public’s attention on the SNC-Lavalin affair.
The Conservatives jeered. They pounded their desks and they chanted “let her speak” in reference to their demand that former Attorney General Jody Wilson-Raybould re-appear before the justice committee to discuss why she resigned.
Undeterred, the finance minister gamely plowed on, incapable of being heard on radio and television broadcasts, or even by his own mates on the government benches.
Morneau’s fourth budget is not only the last installment of the Liberals’ relentless pursuit of middle-class voters before the October election, it was a road map showing exactly which voters the party needs for another election win.
Millennials. Seniors. Blue-collar workers are all targeted for new spending, whether it’s help buying a first home, enhancements to the Canada Pension Plan or money for training. Mix in the Canada Child Benefit from Morneau’s first budget and from cradle to the grave, this government is putting more money in Canadians’ pockets.

Federal budget 2019: Liberals unveil $23-billion in new spending aimed at seniors and young Canadians
With an election scheduled for the fall, Mr. Morneau pledged to spread new spending across the economy, with 127 measures that are largely aimed at key voter constituencies such as seniors and young adults, as well as longstanding Liberal priorities such as Indigenous Canadians and refugees. The minister made no changes to personal or corporate tax rates, but eliminated a lucrative treatment of stock-options for highly paid executives at large companies.

18 March
Liberals will hope Tuesday’s budget deflects from SNC-Lavalin scandal
By Tasha Kheiriddin
(Global) …the SNC-Lavalin scandal is still in full swing. And it’s not clear what, if anything, will make it go away.
Well, maybe there is one thing: the federal budget. Finance Minister Bill Morneau will present it Tuesday afternoon, and the Liberals are hoping for a channel-changer. It’s the last budget before the October election and the last chance for the government to bribe voters with their own money.
And a lot of money that will be. The government has been hinting at help for every demographic: housing affordability measures for millenials, skills training for older workers, financial support for seniors, and pharmacare for all. There’s even a rumoured broadband investment proposal to connect rural voters — traditionally the Conservatives’ target market — to the internet. All that’s missing are measures for canine care — if only Fido could vote! (Wait, Fido’s owner does. But that might pit dog owners against cat lovers, a rift no sane government would want to open.)
Naturally, the Opposition is accusing the government of using the budget as a weapon of mass distraction, falling on the same day that the Justice Committee meets behind closed doors to debate whether to invite Wilson-Raybould back for a second appearance. According to Conservative committee member Pierre Polievre, “We’re concerned that because (Trudeau) is trying to drown out the SNC-Lavalin scandal, he will spray money in all directions in the hopes that Canadians will be distracted by the sights of their own money flying at them.”

6 March
Trade deficits surge to record highs in U.S., Canada
Both countries buying more from rest of world while selling less than ever before
Statistics Canada reported exports declined by 3.8 per cent during the month, led by a slowdown in energy products that have now declined for five months in a row. Coupled with a 1.6 per cent increase in imports on the other side of the ledger, that pushed the overall trade gap to $4.6 billion — the highest monthly total on record.
“Looking beneath the headline numbers, the broad-based weakness in exports and the negative volumes print is discouraging,” TD Bank economist Omar Abdelrahman said.


BDC: 2018 economic outlook: Global growth brings good news for Canadian entrepreneurs
Economies everywhere are having a banner year, and there’s more to come

3 December
Alberta oil cuts will slow Canadian growth next year, banks say
By Greg Quinn Bloomberg
(TorStar) Alberta’s decision to order oil production cuts will weigh on Canada’s economy next year, according to some of the country’s biggest lenders.
Alberta Premier Rachel Notley said Sunday night oil producers will need to cut output by 325,000 barrels a day, or 8.7 per cent, starting in January. The discount on Western Canadian Select to U.S. benchmark prices widened to $50 a barrel in October, which Notley says is costing Canada billions of dollars in lost revenue. Oil cutbacks add to strains such as slowing consumer spending and the scheduled shutdown of a General Motors Co. plant east of Toronto ahead of the central bank’s next rate decision Wednesday.

27 November
GM’s Oshawa Shutdown: What Will It Cost Canada’s Economy?
Oshawa and surrounding areas are about to lose $300 million a year in pay, but the impact on the rest of Canada won’t be catastrophic.

21 November
Liberals deliver tax breaks for businesses in response to Trump’s rate cuts
(Globe & Mail) The Liberal government has delivered billions of dollars in tax breaks for businesses in an economic update that gives priority to incentives for new corporate investment over shrinking the federal deficit.
Finance Minister Bill Morneau said Ottawa needed to address the real concern that tax cuts enacted this year under U.S. President Donald Trump could shift profits and investment south of the border.
Wednesday’s fall economic statement revealed Ottawa now expects billions more in revenue over the next five years than it was counting on at the time of the February budget thanks to stronger economic growth. But the new tax breaks for businesses, and spending announced since the budget, mean future deficits will be slightly larger.
Fall Economic Statement Unveils 3 New Tax Credits To Save Canadian Journalism Industry
The measures will cost an estimated $595 million over the next five years.

Canada – Economic forecast summary (OECD November 2018)
READ full country note (PDF)
Growth is on course to moderate to slightly below 2% by 2020, with consumption slowing in response to smaller increases in housing wealth, and employment and exports moderating as US growth declines. Unemployment is projected to remain near record lows and inflation to edge up to slightly over 2%. The Bank of Canada is projected to continue withdrawing monetary stimulus to stabilise inflation around the mid-point of its 1-3% medium-term target band. While fiscal policy is projected to remain neutral, reducing the structural budget deficit would ease the burden on monetary policy and create more room to support the economy in the event of an unexpected downturn. Macro-prudential policies have been tightened and housing markets are stabilising. The government should monitor the effects of recent tightening, especially the prevalence of highly indebted borrowers, and act if it does not decline significantly.

7 September
Canadian Economy Loses 51,600 Jobs, Led by Plunge in Ontario
(Bloomberg) Canada’s economy unexpectedly lost 51,600 jobs, with wage gains slowing and Ontario recording its biggest employment drop in nearly a decade, removing any urgency for the central bank to accelerate rate hikes.
The nation’s largest province lost 80,100 jobs in August, all part-time, the biggest decline for Ontario since 2009. Nationally, the economy lost 92,000 part-time workers, though a 40,400 gain in full-time employment is one sign the labor market is firmer than the headline number suggests.
So far in 2018, the economy has shed 14,600 jobs, but the number masks a 97,300 gain in full-time jobs. Part-time employment is down by 111,900 this year.

14 June
Canadian economy headed for solid, albeit slower 2018 – RBC Economics
Canada’s economy started 2018 on a soft footing and growth will likely pickup modestly in the quarters ahead: RBC expects GDP to grow 2.0 per cent in 2018
Recent U.S. tariffs have relatively small impact on Canada: Steel and aluminum production account for just 0.5 per cent of Canadian GDP and jobs
Provincial economic growth slowing: All 10 provinces are expected to see their economic growth rate slow compared with last year

1 March
Philip Cross: Statscan’s latest report shows how badly our governments demolished business investment
Investment has fallen steadily since 2014, with a total decline of almost 18 per cent, making it one of the weakest in the G7
(FP) There is no clearer sign that Canada’s long-term economic prospects are diminishing than yet another drop in business-investment intentions. But that’s exactly the dismal news delivered by (FP) Statistics Canada’s annual survey, released Wednesday. The steady erosion of business investment in the country, even as it strengthens in the U.S., offers a blanket condemnation of our federal and provincial policy trajectories.
Investment in Canada has fallen steadily since 2014, with a total decline of almost 18 per cent. Once the strongest in the G7, it has been the weakest over the past four years. This latest decline will surprise the Bank of Canada, whose own most-recent survey revealed “broad-based positive investment intentions” returning investment “back to near post-recession highs.” Why are the two reports so different? The Bank of Canada’s covers 100 firms; Statcan’s includes about 25,000.

27 February
Federal government to scrap Phoenix pay system, invest in better customer service at CRA
(Global News) In the 2018 federal budget, the government announced that it intended to “eventually move away from Phoenix” and explore the “next generation” of the federal government’s pay system. This won’t happen anytime soon though. The budget allocates $16 million over the next two years to researching a new pay system.
Not only that, the government is also planning to invest $431.4 million over six years to try to fix the existing Phoenix system.
Added to the hundreds of millions the government has already invested in fixing Phoenix, that puts the total bill at roughly $900 million – on a system that will ultimately be dumped.
READ MORE: Federal Budget 2018: Some (lesser-known) highlights, from Pharmacare to service dogs


1 December
Power puzzle
The Desmarais family’s Power Corp. empire has been treading water since the financial crisis. Now, as a third generation gets ready to take the reins, investors are losing patience. Can one of Canada’s most influential families return the country’s biggest conglomerate to its former glory?
(Globe & Mail RoB) The game plan is based on embracing new technology, returning to the bold dealmaking that was Paul Sr.’s legacy and doubling down on the Desmarais way of doing business – using relationships to unearth investment opportunities.
But the world has changed a lot since 1996. Technology and consumer tastes are shifting rapidly, and the financial services sector is facing its equivalent of a Netflix moment. Most of the great Canadian business dynasties that have thrived for the long term have done so by adapting to changing times and circumstances. The Thomsons switched to specialized publishing and information services and sold virtually all of their newspapers (though they still own The Globe and Mail); the Westons did a massive overhaul of the Loblaw chain and expanded into drugstores; the Rogers family shifted focus from media to cable television to wireless.

23-24 November
Andrew Coyne: Bewitched and bewildered by the Liberals’ National Housing Strategy
It may be part of the role of government to build social housing. But is it the role of the federal government, specifically?
It’s a national housing strategy. It’s a national strategy, for housing. It’s a housing strategy, only it’s national. It’s a strategy for national housing…
That gives you the flavour of much of the coverage of the Trudeau government’s new National Housing Strategy. Had it simply been billed as a plan to spend more money on housing it might not have excited quite such admiring notice. But somehow those two words — “national” and “strategy” — seem to have a peculiarly bewitching effect. It is enough to recommend it that it is, or is called, a national strategy. What’s actually in the strategy? Who cares!

(Globe & Mail) The Trudeau government’s announcement of a $40-billion housing strategy sets off negotiations with provinces to determine where the funding will end up – and how much provincial governments will need to chip in. Prime Minister Justin Trudeau heralded the plan as a chance to have a “lasting impact” on the national housing picture, with programs such as a $4-billion housing benefit for low-income renters. But the 10-year program assumes provinces will be willing to match federal spending plans in some areas, and key elements, including the renters’ housing benefit, won’t begin until 2020. Several premiers quickly praised the announcement but stopped short of saying what their governments are prepared to contribute. In British Columbia,  where a tight real estate market has pushed the housing market into crisis, politicians and advocates say the federal announcement was simply too vague to determine who will benefit.
‘Absolutely historic’: Federal government launches ‘human rights-based’ housing strategy
(The Current CBC)The federal government has unveiled its new national housing strategy, eliciting strong reactions across the political spectrum.
The 10-year plan includes the introduction of a housing benefit for families and the building of 100,000 new affordable housing units.
This move to address the housing challenges of low-income Canadians is long-awaited with 1.7 million Canadians currently unable to find affordable housing.

Jack Mintz: Heads up, Canada! America’s about to trounce us on tax reform
U.S. taxes on new investment will fall from the third to the 14th-highest rate, better than Canada
(Financial Post) It’s now very possible that the U.S. will accomplish a better tax structure that reduces distortions, minimizes complexity and is fair. Since tax reform is political, the plan is inevitably a mixed bag, but overall, the reform would be a major success.
On the plus side, both the House and Senate bills differ little in creating a more competitive and neutral business tax system. Both reduce the federal corporate rate to 20 per cent (only the start date differs, with the Senate implementing it a year later, in 2019) and reduce taxes in a less straightforward way for other businesses. Both introduce a new limitation on interest deduction that will discourage excessive corporate leverage. Both will expense rather than depreciate machinery investments for five years (which favours one type of investment over another, contrary to the goal of minimizing distortions). As a major reform, both will enable U.S. companies to repatriate dividends from foreign affiliates without paying U.S. tax, a system used by all advanced countries including Canada today.

17 November
Andrew Coyne: Economy is hot, but Liberals not? Maybe voters have realized limits of PM’s powers
Whatever might be claimed to the contrary, beyond not stepping all over it, there is not much governments can do to make the economy grow faster.
It is in the long run that government matters — matters, not in the pull-a-lever-on-the-wall, hey-presto-a-recovery sense that politicians pretend, but in the compounding over time of small annual improvements in national productivity, the sum of a hundred little changes in policy. These are not the sort of big-ticket measures — Thirty! Billion! Dollar! Deficits! — so spectacularly deployed at the aggregate or macroeconomic level. They are rather the stuff of microeconomics: changes in tax rates, in trade and regulatory policy, that are concerned with how markets work, or could be made to work better.
Again, these are mostly in the nature of tearing away the accumulated underbrush of past, ill-considered policies. But they are of far greater impact in the long run. Alas, as the long run is typically taken to mean “after the next election,” these tend to be little discussed. I recall seeing it once put this way: Economists know the most and are in most agreement about microeconomics — for example, on the benefits of free trade, or the evils of rent controls — matters on which they are routinely ignored. By contrast, they know the least and are least in agreement on matters of macroeconomics — on which they are treated like seers.

9 November
‘From ebullient to dreadful’: That’s the economic sentiment, not the reality
(Globe & Mail) Economic growth is certainly slowing – it would have been damn near impossible to match the second quarter’s annual pace of 4.5 per cent – but we haven’t suddenly gone “from boom to bust.” …
yes, there’s a lot out there to fret about, including what’s expected to be a consumer pullback, but, like BMO, Bank of Nova Scotia sees some bright spots, as well.
Just look at record auto sales, for one thing, said Scotiabank deputy chief economist Brett House and senior economist Adrienne Warren.
“Service-sector activity remains brisk, with notable gains in wholesale and retail trade, transportation and warehousing, and financial and professional services,” they added.
“Business earnings and capital goods investment are advancing at the fastest pace since 2011. Exports have weakened in recent months, due in part to temporary production shutdowns in a number of sectors, but are expected to rebound later in the year given strengthening global industrial activity. Infrastructure spending remains supportive of growth.”

22 October
All in the name of saving some $$ – very sad
A piece of Canadian history, for sale to the highest bidder
An auction for the Canadian Coast Guard Ship Matthew closes Friday with a minimum bid of $1M
(National Post) Canada is selling its last inshore coastal surveyor ship … Its loss also “decimates” a crucial maritime capability, to map the sea floor off Canada’s coastline, according to people who sailed on the CCGS Matthew over its quarter century of service.
“It’s absolutely appalling,” said Michael Lamplugh, a retired hydrographer with Canadian Hydrographic Service, who led the team on the Matthew for ten years until 2012. Just the sonar on board is worth more than Canada is asking, he said. And with no replacement, Canada risks not only domestic maritime safety, such as for cruise ships in the Northwest Passage, but also its geopolitical credibility in disputes over sovereignty in the Arctic Ocean.

21 October
A finance minister under siege: What’s next for Bill Morneau?

19 October
Morneau’s latest ‘step back’ on tax proposals seeks to ease concerns from family farms, fishers
Finance Minister Bill Morneau climbs down on tax changes that triggered backlash from farmers, fishers
Morneau said the government is abandoning the proposed tax reform that would have restricted the conversion of income into capital gains.
“We’re going to take a step back and reconsider that aspect of our tax proposal,” he said.
The proposal would have made it more difficult for farmers and other business owners to pass on their businesses to their children.
Liberals continue tax change tour
Proposed reforms had raised fears they could add significant costs for some business owners who hope to keep certain types of businesses — like farms — in the family. Morneau has already said he has listened to the worries and that technical fixes were likely on the way to address the issue.

10 October
What ARE the Liberals thinking of?
CRA under fire for new rule to tax employee discounts
The Liberal government has ordered the Canada Revenue Agency to back away from its plan to tax employee discounts, following strong objections from the business community.
The office of National Revenue Minister Diane Lebouthillier said it has heard “loud and clear” from Canada’s retail advocates who warned that the most recent CRA guidelines would create an unworkable burden for employees and employers.
The latest tax controversy involving the federal government came after the CRA recently updated its written interpretation of existing tax laws by stating that employee discounts should “generally” be reported as income, meaning they should be treated as a taxable benefit.
[Rachel De Grâce, manager of advocacy and legislative content with the Canadian Payroll Association] said employee discounts are sometimes included as part of collective bargaining agreements, raising questions as to how the CRA expected that it could change its policy as of Jan. 1, 2018. She also questioned how the CRA would enforce whether or not employee discounts are treated as income. She also questioned how the CRA would enforce whether or not employee discounts are treated as income.

28 September
Elizabeth May: Simplify the tax system and target the right people
(Ottawa Citizen) I am coming to the conclusion that the Liberals’ tax changes may not be directed at all the individuals and companies who are now panicking. In an attempt to capitalize on this issue, some parties are pressing the panic button hard.
It is clear the Liberals are themselves panicked about heading into the 2019 election with a deficit that could be as high as $30 billion. Reducing the deficit matters.
We need to balance the budget, but at the same time, we must increase spending. Too many areas of critical public investment have been ignored for too long. We must restore habitat protection to our fisheries; rehire federal scientists; re-open offices for veterans’ services; improve health and education, housing and water infrastructure in Indigenous communities; and address the soaring infrastructure deficit. None of this is cheap and no one wants to acknowledge the reality that the Stephen Harper administration cut taxes too deeply while increasing the federal debt.
In short, federal taxation rates are too low.

26 September
Bank of Canada walks fine line between rate hikes and high-flying loonie
The Canadian dollar is up 9% this year, threatening to put the brakes on the country’s economy just as it gains momentum
(Financial Post) While talking down the currency risks upsetting the bank’s G20 peers, rapid appreciation of the loonie could put the brakes on the country’s economy just as it gains momentum.
The currency has risen 9 per cent against the greenback this year. It jumped 2.5 cents after an unexpected Sept. 6 rate hike and bank statement that said the loonie’s appreciation reflected economic strength.

25 September
The problem with Trudeau’s high road
Paul Wells: The Liberals can’t seem to resist claiming moral superiority. But on their tax reforms, it’s not totally clear what side they’re on.

22 September
Inside the Liberals’ controversial tax changes: What’s proposed, why they’re doing it and what comes next
(Globe & Mail) Well-organized campaigns led by business and professional organizations are urging the government to back down. Other voices, including prominent academic economists and labour leaders, say the government’s proposals are on the right track.
The changes, which were announced on July 18, are highly complex. Consultations are scheduled to close on Oct. 2.
Proposal one: ‘Income sprinkling
What it is: Business owners can distribute income to family members (such as a spouse or adult children), whether or not they directly contribute to the running of the business. If the business owner, which can be a professional, is in a high personal-income tax bracket and the family member is in a lower bracket, the overall amount of tax paid by the family is lower than if all the income was reported by the professional.
What the government would change: Currently, tax rules discourage the paying of dividends to children under the age of 18 for the purpose of lowering the tax burden. This provision is known in accounting circles as the “kiddie tax.” The new rules would extend this to older children and other family members. The Canada Revenue Agency would apply a “reasonability” test to see if family members were contributing to the business. Otherwise, the family members could face a higher tax bill.
Business response: Small businesses that pay dividends to family members or trusts say that the policy recognizes the informal contributions that family members often make to a business. They also say that the new reasonability test means more work for the businesses – red tape – to show they are complying with regulations. More than half of doctors – who work as private contractors and bill the government for the work they do – use this corporate setup, according to the Canadian Medical Association. As The Globe’s Campbell Clark reported, past governments have promised doctors lower tax burdens through mechanisms such as income sprinkling as a way to compensate for not paying as much directly.

21 September
Canadian economy to outpace Eurozone, U.S. in 2017: report
(Business Vancouver) Canada can expect to see total economic growth of 3.1% in 2017, according to a Conference Board of Canada report released September 21, which is higher than the growth expected in the Eurozone (2%) and the United States (2.2%).
We can’t expect this pace to continue into next year, however, according to the report, and growth next year is expected to slow to 2%.
“Canada’s economy continues to perform well above potential and is on track to outperform most other developed economies by a sizable margin,” said Conference Board director Matthew Stewart.
“However, the recent pace of expansion is unsustainable, and economic growth will slow over the second half of this year and into 2018.”
The economy is being buoyed by consumer spending – the result of a strong labour market – but the cost of servicing debt is on the rise, and this will be a drag on spending over the second half of 2017.
Employment is set to increase 1.5% over the year, which is the strongest increase since before the 2008 financial crisis. Wage growth, however, has been “anemic,” according to the report, with a total increase of 1.4% expected this year.

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