Bill Morneau won’t have a lot of good news when he rises in the House of Commons on Tuesday to deliver his fall economic update. And that, strangely enough, isn’t a bad thing for a finance minister whose job is to build what Liberals call “the economy of the future.”
The facts are the economy of today remains sluggish.
Job creation is less robust than hoped. Statistics Canada reported in June that private business investment fell for a fifth straight quarter. Canadians’ buying power also declined.
“We have invested in the middle class with a tax reduction,” François-Philippe Champagne, parliamentary secretary to Morneau, said Thursday. “Then we made historic investments in infrastructure — $120 billion over 10 years. We have an investment plan for innovation.”
“Investment” is the Liberals’ preferred description for spending billions of taxpayer dollars. Like with many investments, the returns are slow to materialize.
And that plays into Morneau’s message about building for the future.
He took a lot of heat last spring when he announced the Liberals would run a nearly $30-billion deficit this year in an effort to stimulate the economy and expand the ranks of Canada’s middle class.
Some accused him of underestimating economic growth, others said he exaggerated the size of the deficit. Still others suggested his decision to double the usual $3-billion contingency fund (a kind of rainy day fund to cover unexpected shortfalls) was unnecessary padding.
Now, many economists think most of that contingency fund has been spent, putting the deficit in the range Morneau forecast back in March.
Morneau is expected to use Tuesday’s update to announce a new phase of infrastructure spending. Not additional money, but spending what he’s already committed more quickly — on public transit, green technologies and so-called “social infrastructure” such as affordable housing.
Sources tell CBC News other ministers will be out later in the week to reinforce the commitment to build that economy of the future by announcing new policy initiatives in transportation and innovation, and to set new immigration targets for the next year.
All of these good news announcements come against a backdrop of a Canadian economy that continues to underperform for reasons that, for the most part, are beyond Morneau’s control.
Low oil prices and slower-than-expected demand for Canadian exports prompted the Bank of Canada and others to downgrade their economic forecasts for this year and beyond.
The wildfire in Fort McMurray, Alta., back in May shut down oil production and contributed to a 70 per cent increase in employment insurance claims in parts of that province and Saskatchewan.
Making matters more difficult is Canada is a country of several economies. Some regions, such as British Columbia and Quebec, are doing better than others.
Just this week, Quebec reported a $2.2-billion fiscal surplus. That’s well above the $1.4-billion surplus forecast in the province’s March budget.
The reason, according to Quebec Finance Minister Carlos Leitao, is the province’s austerity program. The reward? New spending on health and the phasing out of a health tax imposed in 2010.
Quebec’s economy is expected to grow by 1.4 per cent this year, 1.7 per cent the next.
Newfoundland and Labrador, on the other hand, had but one bright spot in its fall update released Thursday: its deficit is lower than expected at just under $1.6 billion.
The reason? Spending controls and tax hikes. The reward? More austerity and continued higher taxes.
The province is now forecasting growth of just 0.6 per cent this year, down from one per cent.
So what can Morneau do as he prepares to release his own updated growth, revenue and spending numbers next week?
He can double down on the things he does control.
A July briefing note sent to Morneau and obtained under Access to Information suggests the department’s communications strategy include “an increased focus on the government’s long-term growth agenda and actions.”
While all but four paragraphs are redacted, the department says “growth will occur as a result of new investments and policy measures to help create a legacy of success in delivering on the needs of the middle class.”
That brings us to the release last week of the first report from Morneau’s advisory council on economic growth.
The report, entitled The Path to Prosperity — Resetting Canada’s Growth Trajectory, calls for strategic infrastructure spending to support the government’s growth agenda, including the creation of an infrastructure development bank that would raise private and public money to create “$200-billion worth of projects over the next 10 years.”
It also calls for a new agency to attract more foreign investment in Canada, and a plan to recruit highly skilled immigrants in high-tech and other industries who now wait up to a year for work permits.
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These are, of course, measures intended to improve Canada’s long-term economic outlook. How, exactly, the money will be spent and on what projects isn’t clear.
Neither is it clear what impact the council’s recommendations, if enacted, could have on Morneau’s ability to return to balanced budgets in time for the next election.
The Liberals are confident that Canadians are less concerned about deficits than they are about the government following through on its commitment to build that economy of the future — even if there’s not much good news for Morneau to share in Tuesday’s update.
Article source: http://www.cbc.ca/news/politics/economic-update-morneau-1.3825001?cmp=rss