Published On: Tuesday, 31 October 2017
Stronger Action to Tame Federal Deficit & Improve Canada’s Competitiveness
BC - The Business Council of British Columbia offered the following comments on the recent Economic and Fiscal Update presented in the House of Commons by Finance Minister Bill Morneau.
“We welcome news that the federal government’s budget deficit is shrinking more quickly than expected, mainly thanks to stronger economic growth so far in 2017,” says Greg D’Avignon, the Business Council’s President and CEO.
"Having said that, with the Canadian economy operating close to capacity, we believe the government should be aiming to achieve a balanced operating budget sooner than they are currently projecting.”
“Over the past year, Canada’s economy has been outperforming what forecasters were calling for nine and 12 months ago,” adds Jock Finlayson, the Business Council’s Executive Vice President and Chief Policy Officer.
“While this is good news, we believe growth is set to downshift as interest rates move higher, consumer spending slows, and business comes to grips with an unsettled economic landscape. The latter includes the fact that the future of NAFTA is in question and Canada’s competitiveness is eroding due to rising taxes, costly new regulations, and the difficulty of advancing industrial and infrastructure projects in key sectors of our economy.”
Commenting specifically on the federal government’s infrastructure plan, Mr. D’Avignon expressed support for the establishment of the proposed Canada Infrastructure Bank. But he also highlighted the sluggish pace at which new infrastructure spending is being implemented.
“The weakness of the economy in 2015-16 meant that this was an ideal time to increase infrastructure spending. The situation is different today, as there is much less slack in the economy. The length of time and heavy costs involved in initiating infrastructure projects in Canada speak to one of the most troubling features of the country’s business environment.”
The Canadian business community is concerned about the status of the NAFTA negotiations and the prospect that the agreement could unravel.
“The United States accounts for three quarters of Canada’s merchandise exports and buys more than half of our exports of services. Doubts about NAFTA will weigh on business investment and sentiment in Canada,” notes Finlayson. “Anything the federal government can do to lessen uncertainty about access to the United States market would be helpful in the current context.”
With the United States acting to overhaul and reduce taxes and tackle excessive regulation, Canada needs to be alert to the risk that investment and jobs could flow south. “We urge the Trudeau government to re-calibrate its approaches to tax policy and to energy and environmental regulation,” says D’Avignon.
“Policy-makers at all levels of government need to redouble efforts to ensure that Canada remains an attractive location for new investment and corporate head offices, including in the natural resource, manufacturing and infrastructure sectors.”
Finally, the Business Council applauds the federal government’s commitment to spur innovation and develop a highly skilled workforce. “The Business Council endorses greater financial support for low and middle-income students enrolled in post-secondary education, as well as stepped up funding for work-integrated learning programs and research internships,” states Finlayson.
“We are also hopeful that the government’s re-tooled innovation strategy, once in place, will succeed in accelerating growth and job creation in key industrial sectors, including digital technology, health/bio-sciences, advanced manufacturing, and clean tech.”