Canada economy October 2023-

Competition Bureau Canada

22 April
Paul Wells: A brain gain, for a change
Chrystia Freeland’s budget was full of money for research. What happens next?
Today I want to live dangerously and talk about a chapter in the budget that’s been well received. Or part of a chapter at least: it’s the stuff on science and research in Chapter 4, Economic Growth for Every Generation.
…what people who follow research policy noticed is that the measures I’ve listed here closely match the recommendations of a 2023 report from Frédéric Bouchard, the Dean of the Faculty of Arts and Sciences at the Université de Montréal.
… Lately I’ve been urging scientists to better understand why their requests for ever-increasing amounts of money with ever-decreasing government oversight sound so bizarre to governments. So Freeland’s decision to cede so much to the research community (urged, I’m sure, by Industry Minister François-Philippe Champagne) is surprising. Here’s what I think happened.
First, the researchers have a point. Investigator-led research works in unpredictable ways, but it often works in concrete ways with lots of zeroes attached, as I wrote in the most heartfelt article I’ve ever written about this stuff*.
Second, I think the government has been surprised at how pissed off researchers are becoming. I’ve simply never seen a news release from Universities Canada like the one that followed 2023’s budget. For years the Trudeau government’s response was, “what are you gonna do, vote Conservative?” Lately I suspect they’re unnerved by the silence that follows that question.
Finally, I think the proximity of an election is precisely the point. Governments often like to announce things when they’re at risk of losing an election. If it doesn’t help them win, it makes trouble for a future government. The Ontario Liberals never had to run a francophone university for Ontario, they just had to promise one and watch Doug Ford twist.
So sure, there’s a chance that Freeland’s 2024 budget will be a problem for Chrystia Freeland (or Mark Carney, whatever) in 2027. There’s a bigger chance it’ll be a problem for Finance Minister Rachel Thomas. Do you think Pierre Poilievre wants to spend billions on AI servers? Or literally double government paycheques for 30-year-old social scientists?
So there’s a paradox here. It’s clear that Frédéric Bouchard’s report changed the conversation about science policy in Canada. And I think this budget is intriguing evidence that François-Philippe Champagne can push a file uphill. But scientists have been pleading with governments for years to think less about politics. All the same, I suspect this windfall arrives now because this government is thinking as much about politics as ever.
* A lesson for policy-makers from the life of Tony Pawson – ‘View basic science as a long-term investment that will yield completely unexpected dividends’ (Maclean’s 10 August 2013)

Shortage of skilled tradespeople is hitting all Canadians in the pocketbook, economists say
Economist Steven Tobin, CEO of LabourX, a boutique consulting firm specializing in labour market conditions, says the goods and services Canadians purchase rely heavily on skilled trades and less supply of that labour has caused the prices of those to rise.
(CBC Cost of Living) From a lack of transportation mechanics driving up the cost of bus fare and plane tickets, to a shortage of cooks affecting menu pricing at restaurants, “this is all interconnected in ways that sometimes people underestimate,” [Simon Gaudreault, chief economist and vice-president of research for the Canadian Federation of Independent Business (CFIB)] said.
He said these “underappreciated” careers are not just critical to our economy — they impact us as individual consumers, too. A CFIB report found that small Canadian firms lost $38 billion in business opportunities due to labour shortages in 2022, with the construction sector bearing the largest portion.
The shortage of skilled tradespeople has been developing for years. About 700,000 of the four million Canadians who work in the trades are set to retire by the end of the decade, according to Employment and Social Development Canada.
A culture that exalts university education and knowledge work over apprenticeship and working with one’s hands is also partly to blame…. Additionally, there can be barriers to landing an apprenticeship position, such as finding an employer willing to take on someone with no experience, or limited spaces at colleges.

17-19 April
Capital gains tax: good, bad, ugly?
Slower growth, fewer jobs, a worse economy—the consequences of the capital gains tax shouldn’t be shrugged off
We should be doing all we can to encourage entrepreneurship. This tax increase does the opposite
Derrick Hunter, CEO of Bluesky Equities Ltd
(The Hub) The company that I lead has been one of Canada’s most active early-stage investors over the past decade. Last week, we made our one-hundredth investment in a seed-stage technology company; the large majority of these are located in Canada. We treat this business seriously and for our efforts, we have been recognized with a number of awards including being named Canada’s Angel Investor of the Year for 2019.
There are three main reasons why the dollar that we earn from our investment activity is not the same as the dollar earned by a typical employee. These boil down to risk, liquidity, and the time value of money.
‘Don’t drag your feet’: Some cottage owners face big decision after budget’s tax change
(Financial Post) Canadians who own cottages and other recreational properties may be contemplating their options after Tuesday’s federal budget raised the capital gains tax on annual amounts in excess of $250,000.
Why raising capital gains taxes makes sense—yes, really
Starting June 25, two-thirds of capital gains over $250,000 will be taxed
Trevor Tombe, professor of economics at the University of Calgary and a research fellow at The School of Public Policy
(The Hub) From the perspective of getting the underlying structure of Canada’s tax system right, increasing capital gains taxes made good sense.
oday, only half of capital gains are taxable. But starting June 25, two-thirds of such gains over $250,000 will count. The increase in the “inclusion rate” could raise $19 billion over five years.1
So what should Canadians make of this? Will it hurt productivity and competitiveness, as some fear? Or will it “tackle one of the most regressive elements in Canada’s tax system,” as the government says?
Canada’s capital gains tax hike another blow to productivity, say economists
‘With this budget, the Trudeau government is shooting us in the foot’
(Financial Post) “Canada’s productivity is in crisis and the best way to get it back up is to attract new investments,” said Renaud Brossard, vice-president of communications at the Montreal Economic Institute in a statement after the budget. “And few are those who have been able to lure investments and job creators with promises of higher taxes.
The Canadian Chamber of Commerce said not only did the tax changes add to businesses’ burden, the budget also lacked a clear plan to promote productivity and economic growth.
“We oppose any measure which will increase the costs for businesses and Canadians when both are currently experiencing challenging economic headwinds” …

16-17 April
Sour grapes?
Bill Morneau slams Freeland’s budget as a threat to investment, economic growth
Former finance minister says the rich, corporations will think twice about investing in Canada
KPMG accountants on hand for Morneau’s remarks said they’ve already received calls from some clients worried about how the capital gains change will affect their investments.
According to government data, only 0.13 per cent of Canadians — people with an average income of about $1.4 million a year — are expected to pay more on their capital gains as a result of this change.
Canada has a growth problem, Morneau warns
The government is more interested in rolling out new costly social programs than introducing measures that will reverse some of those troubling national wealth trends, he said.
“Canada is not growing at the pace we need it to grow and if you can’t grow the size of the pie, it’s not easy to figure out how to share the proceeds,” he said.
“You think about that first before you add new programs and the government’s done exactly the opposite.”
The U.S. has a “dynamic investment culture,” something that has turbo-charged economic growth and kept unemployment at decades-low levels, Morneau said. Canada doesn’t have that luxury, he said.
A recent International Monetary Fund (IMF) report projects Canada is on track to grow more than the U.S. and much of the developed world in 2025.
Morneau said Freeland hasn’t done enough to rein in the size of the federal government, which has grown on Trudeau’s watch.

Budget 2024 — Fairness for every generation
The 2024 federal budget is the government’s plan to build more homes, faster, help make life cost less, and grow the economy in a way that helps every generation get ahead.
Budget 2024 prioritizes housing while taxing highest earners, deficit projected at $39.8B
(CTV PowerPlay) In an effort to level the playing field for young people, in the 2024 federal budget(opens in a new tab), the government is targeting Canada’s highest earners with new taxes in order to help offset billions in new spending to enhance the country’s housing supply and social supports.
Aiming to give Canadian millennials and Generation Z “a fair chance at a middle class life,” Deputy Prime Minister and Finance Minister Chrystia Freeland’s budget outlines how the Liberals plan to allocate $39.2 billion in net-new spending, while upholding the intended fiscal guardrails.
Framed as pursuing tax fairness, one of the main ways the Liberals are planning to bring in new revenue is by “asking” Canada’s very wealthiest to pay more, with Freeland saying it would be irresponsible to pass on more debt to future generations by ignoring the fiscal anchors Freeland tied government to last fall.
Aside from the weeks long pre-budget blitz of expected new measures, the 2024 budget includes some additional offerings for small businesses and entrepreneurs – including through a new carbon rebate – and finally puts dollar figures on the first phase of national pharmacare, as well as the long-promised disability benefit.
Overall, the 2024 federal budget includes $52.9 billion in new spending plans – some of which is loan-based and reliant on provincial buy-in – as well as an estimated $20 billion in new tax revenue, including tobacco and vaping taxes.

Canada Growth Summit 2024: Fixing productivity once and for all
Thursday April 11, 2024
7:30 a.m. – 2:00 p.m.
Canada’s productivity has fallen for the past 13 quarters, sinking all the way back to 2016 levels. As a result, Canada finds itself mired in a deepening growth, competitiveness and living standards hole. Productivity, it turns out, is not left or right or pro-business or anti-workers. It is a universal good. That’s especially so in a tight labour market. Labour and capital are not rivals; they tend to be mutually supporting in a modern economy. As Globe economics writer Andrew Coyne says: “the problem is not that we have too much labour, but too little capital – machinery and equipment – for labour to work with.”

Canada’s productivity woes going from bad to worse a panel of economists told a conference in Toronto Thursday.
Over an eight-year period, Canada has never seen slower labour productivity growth, said Trevor Tombe, an economics professor at the University of Calgary, during the annual Canada Growth Summit.
“The scale of the challenge, the speed of it worsening and the importance of addressing it are now bigger than in most of our lifetimes,” he said. The country’s productivity has fallen for the past 13 quarters and is now back to where it was in 2016.
Tombe appeared on the panel hosted by The Public Policy Forum on April 11 alongside former Bank of Canada senior deputy governor Carolyn Wilkins, Unifor economist Kaylie Tiessen and Dan O’Brien, chief economist of Institute of International & European Affairs.
The sense of urgency of the productivity issue involves forces that aren’t only affecting the Canadian economy but others as well, such as geopolitical tensions, said Wilkins, now a senior research scholar at Princeton University.

7 April
Trudeau announces $2.4 billion for AI-related investments
Spending commitment unveiled Sunday latest in string of pre-budget announcements
The Liberal government is setting aside $2.4 billion in its upcoming budget to build capacity in artificial intelligence, Prime Minister Justin Trudeau announced Sunday.
The bulk of that — $2 billion — is going into a fund that will aim to provide access to computing capabilities and technical infrastructure.
The government plans to launch a $50-million AI safety institute to protect against what it calls “advanced or nefarious AI systems,” and another $5.1 million will go toward an office of the AI and Data Commissioner to enforce the proposed Artificial Intelligence and Data Act.
Innovation, Science and Industry Minister François-Philippe Champagne said Canada is a world leader in AI. “Let’s stop asking what AI will do to us, and why don’t we start asking what we want AI to do for us,” he said.
Deluge of federal pre-budget announcements draws fire from opposition, premiers
Several of the recent commitments would require provincial buy-in
(CBC) Trudeau and federal ministers have been on a countrywide tour in recent weeks to make a series of pre-budget announcements. Many of those announcements have focused on housing, but Trudeau has also signalled the government’s intent to launch a national school food program and invest in the artificial intelligence sector.

3 April
Trudeau announces $15B more for apartment construction loans
Loan program top-up is the latest pre-budget announcement by Liberal government

21 March
Temporary immigration programs are pushing down wage growth in Canada, economists say
The temporary foreign worker dilemma: Programs are suppressing wage growth in low-pay sectors, which in turn is helping in the battle against inflation
(New Canadian media) Temporary immigration pathways are putting downward pressure on wage growth in Canada, but aren’t responsible for the country’s stagnating GDP per capita growth rate or the productivity rate, economists say.
While immigration does not normally suppress wages, economists agreed, temporary foreign workers entering the country over the last 18 months arrived when Canadian job vacancies were peculiarly high due to the pandemic.
Most temporary foreign workers are employed in the accommodation and agricultural industries, which are the lowest-wage sectors of the economy, according to Statistics Canada.

8 February
BCE Inc. cutting 9% of workforce or 4,800 jobs,including journalists and other workers at its Bell Media subsidiary, selling 45 radio stations
(Canadian Press) The company says it could also further scale back network spending as it remains at loggerheads with the CRTC over what it calls predetermined regulatory direction.
Hearings are scheduled next week by the federal telecom regulator as part of a review into the rates smaller internet competitors pay the major carriers for network access.
Thursday’s announcement marks the second major layoff at the media and telecommunications giant since last spring, when six per cent of Bell Media jobs were eliminated and nine radio stations were either shuttered or sold.
Bell Media ends some CTV newscasts, sells radio stations in media shakeup amid layoffs
Bell Media is ending multiple television newscasts and making other programming cuts after its parent company announced widespread layoffs and the sale of 45 of its 103 regional radio stations.
In an internal memo to Bell Media employees on Thursday, it said news stations such as CTV and BNN Bloomberg would be affected immediately.
The radio stations being sold are in British Columbia, Ontario, Quebec and Atlantic Canada.

6 February
Frank Stronach: A political revolution to save us from economic armageddon
Everyone should be worried about the state of our country
An Oxford Economics report published in late December shows that Canada’s GDP growth is projected to be lower than most other advanced economies, with one of the main culprits being the high level of debt that many Canadian households are carrying.
The real question, though, is: why does Canada now pretty consistently find itself at the back of the pack when compared to other G7 countries?
When it comes to the economy, Canadian CEOs are also rather gloomy: only one out of every four thinks economic growth will improve this year, according to PwC’s annual Global CEO survey, which was released last week. The same survey revealed that nearly half of Canadian CEOs question whether their businesses will still exist 10 years from now.
When asked to list some of the factors that are driving changes in the way their companies operate, CEOs said one of the most prominent factors is government regulation, just slightly behind technological advances and changing customer preferences.

5 February
Manulife will cover specialty drugs at any pharmacy after Loblaw deal backlash
(BNN Bloomberg) Manulife Financial Corp. says patients who require specialty drugs will be able to fill their prescriptions at any pharmacy after backlash sparked by the insurance provider signing an exclusive arrangement with Loblaw Cos. Ltd.
The insurance provider had told patients last month its specialty drug program would transition to being carried out “primarily” through Shoppers Drug Mart and other Loblaw-owned pharmacies. Manulife had previously also covered specialty drugs through national home and community health-care provider Bayshore HealthCare.

2 February
Loblaw CEO Per Bank isn’t here to be famous
… During a fraught time, Loblaw has had some missteps. In 2023, the company took to social media to explain the causes of inflation to people who were complaining – a defensive tone that did not sit well with some. Last month, it walked back a plan to cancel 50-per-cent discounts for food nearing its expiry date, after facing a backlash.
“I’m not pleased with where we are,” Mr. Bank said of the company’s image. “Some of the things where we’re giving to customers, giving them more value, I think that will help. And doing more of the right thing.”
As an example, he cites a new promotional program launched this week, significantly slashing prices on four items for the month of February. Kraft Dinner is one, coming down from its regular price around $1.50, to 55 cents a box. Partly, this was achieved through better negotiations with big suppliers such as Kraft, Mr. Bank said, but also, Loblaw will be selling that product at a loss. Loblaw is planning to release these kinds of deep discounts on a handful of products each month.

11 January
Trudeau botched immigration surge, Canada’s top bank economists say
Rapid population growth causing economic damage and needs to be reconsidered
(Financial Post) Canada accepted about 455,000 new permanent residents in the year to Oct. 1 while bringing in more than 800,000 non-permanent residents.
Canada’s current immigration policy — among the most open in the world — is now causing economic damage and needs to be reconsidered, according to the country’s top economists.
Prime Minister Justin Trudeau’s decision to dramatically increase immigration — and allow a flood of temporary workers and international students — without providing proper support has created a laundry list of economic problems, including higher inflation and weak productivity, chief economists at Canada’s biggest banks said Jan. 11 during a wide-ranging panel discussion in Toronto

3 January
Debt levels mean Canada’s recovery could lag other advanced economies: report
(BNN Bloomberg) Canada’s economy is largely expected to rebound this year, but a recent report suggests Canada could fare worse than similar countries in 2024 due to high levels of household debt.
An Oxford Economics report projects interest rates will come down in late 2024 as Canada experiences a “modest recovery.” But the researchers cautioned that the bounce-back will fall below consensus projections and “worse than other advanced economies.”
“One of the reasons we think Canada is going to have a recession and the U.S. might avoid one is because we have highly indebted households that are very dependant on the housing market and the economy and those impacts are flowing through now,” Tony Stillo, Oxford Economics’ director of economics for Canada, told BNN Bloomberg in Wednesday interview.
Overall, the December report suggested that Canadians will remain reluctant to spend even as interest rates come down.

2023

Competition Bureau report finds Canada’s competitive intensity in decline
Today, the Competition Bureau published the findings of an in-depth study ꟷ Competition in Canada from 2000 to 2020: An Economy at a Crossroads ꟷ which tracks a decline in Canada’s competitive intensity over the last two decades.
The study is the first of its kind in Canada to provide a comprehensive analysis of indicators of competition across the Canadian economy. (19 October 2023)

9 December
Canada’s surging cost of living fuels reverse immigration
(Reuters) – The dream of making it big in Canada is turning into a battle for survival for many immigrants due to the high cost of living and rental shortages, as rising emigration numbers hint at newcomers being forced to turn their back on a country that they chose to make their adopted home.
Prime Minister Justin Trudeau has made immigration his main weapon to blunt Canada’s big challenge of an aging and slowing population, and it has also helped fuel economic growth. That drove Canada’s population up at its fastest clip in more than six decades this year, Statistics Canada said.

23 November
[Doug Porter] BMO chief economist reveals the ‘new villain’ of Canadian inflation
(Globe & Mail) “This is basically the story of the housing unaffordability crisis in one chart. Rents have exploded higher by 8.2 per cent year-over-year in the past 12 months, the fastest pace since 1983. (Recall, a month ago we said that rents are the new villain in the inflation saga.) That’s about 7 percentage points faster than the average annual increase in the 20 years prior to COVID. More importantly, the rise in rents is now far outpacing the underlying trend in personal income. Over the past five years, disposable income per person has perked up to a 3.9-per-cent annualized pace. That’s actually been a touch above average overall inflation over that period (of 3.4 per cent). But it is now miles below rent inflation. This is the first time in 60 years of records that income growth has trailed behind rents—and it’s not even close.

22 November
The Liberals’ new definition of restraint: overspending by less than they had previously
Andrew Coyne
Every time the Liberals update the country on the state of its finances, it is accompanied by pages of prose trumpeting the government’s devotion to fiscal restraint. And yet, every time, spending somehow ratchets higher.
Over the years this contradiction has required ever more creative arguments to conceal. This time around the line is that, although spending is higher, deficits are higher and the debt is higher – tens of billions of dollars higher – than projected in the budget eight months ago, they are not as much over budget as they were expected to be.

21 November
2023 Fall Economic Statement: Outrunning the Hard Rain
Kevin Page, President of the Institute of Fiscal Studies and Democracy at the University of Ottawa, former Parliamentary Budget Officer
(Policy) There are few new announcements of fiscal significance. Times are tough. The economy is not growing and unemployment is rising. Expect more of the same in 2024. Freeland is also telling Parliament and Canadians that the government is doing a lot to address affordability and housing supply shortages, even if it feels like they are falling short.
But the fiscal plan is caught between a rock and a hard place.
Traditionally, when governments face economic slowdowns, ministers of Finance will allow the deficit to grow. A loosening of the belt is considered prudent (P.S., many observers do not think the Liberal government has a belt in its wardrobe). A weaker economy means fewer- than-expected revenues and more spending for employment insurance. Conceptually, fiscal restraint in a slowing economy can make things worse. We want governments to stabilize unstable economies. Times are changing. Hell, times are already worse. Call it inflation and the need to lower high interest rates before a soft landing for the economy gets hard.
Six highlights from the fall economic statement as Canadians struggle with affordability issues
The federal government unveiled its 2023 fall economic statement on Tuesday, with promises of new spending to help build affordable homes, support renters and clamp down on Airbnbs.
Federal efforts to solve Canada’s housing crisis are but a drop in the bucket
Craig Alexander has served as chief economist at Deloitte Canada, the Conference Board of Canada and Toronto-Dominion Bank.
(Globe & Mail) It’s hard not to be cynical about the federal government’s housing policy and its ability to resolve Canada’s housing affordability crisis. In 2017, the federal government announced Canada’s National Housing Strategy: a 10-year plan to help improve affordability, availability and quality of housing. Yet six years later, housing affordability has worsened.

10 November
How Canada – and Bay Street – squandered the chance to finance the critical minerals revolution
Capital has disappeared from Canada’s once-thriving junior mining industry. Badly-burned investors are scared to touch the sector, and companies are barely treading water
While financings for all sectors are slow this year because investors are recalibrating after the COVID-19 pandemic tech bubble popped, mining has lost its lustre in the Canadian market. There are fewer investment banks providing research coverage of up-and-coming mining companies, and fewer investment advisers paying attention to the sector. When a junior company tries to raise money, there just aren’t as many people willing to listen to the sales pitch.
The struggle to finance terrifies politicians and diplomats because Canada and the United States are losing the global critical minerals war. “Simply put, we don’t have enough of these minerals today to meet the world’s – and our own – growing demand,” David Cohen, the U.S. ambassador to Canada, said in an October speech.
The worry is that China is hoovering up critical minerals and will use them against the West in a geopolitical provocation, the same way Russia held its natural gas supply over Europe’s head when it attacked Ukraine. Currently, China refines more than half of all nickel, lithium and cobalt worldwide.

9 November
Government of Canada to release the 2023 Fall Economic Statement on November 21, 2023
The Fall Economic Statement will provide information on the state of the Canadian economy and update on the government’s economic plan to help create good jobs, to build more homes, and to make life more affordable.
Can Mark Carney save Justin Trudeau?
By Max Fawcett
(National Observer) As the former governor of the Bank of Canada and the Bank of England, Mark Carney brings a level of economic sophistication few can match. Is it the right fit for the moment, though?

31 October
Canada’s economy stalls in August, seen slipping into recession in Q3
By Ismail Shakil and Steve Scherer
(Reuters) – The Canadian economy stalled in August and likely slipped into a shallow recession in the third quarter, data showed on Tuesday, a sign the central bank’s 10 interest rate hikes since last year are weighing on growth.
With the economy stumbling along slower than the Bank of Canada forecast just last week, analysts said there is no need to raise rates again from 5.0%, a 22-year high. The Canadian dollar was trading lower, near its weakest level in a year.