BCBC In The News
Business in Vancouver: Canada must take long road on growth, Poloz says
On the same day that Bank of Canada governor Stephen Poloz was in Vancouver speaking about monetary policy, federal Finance Minister Bill Morneau last week was updating his 2016 budget with a commitment of an additional $81 billion in capital works spending over the next decade.
What the two presentations had in common is that, to a great extent, both take long-term views for managing Canada’s economy as it enters a new era of slow global economic growth.
The Chinese supercycle that drove unprecedented demand for commodities has cooled, the baby boomer generation is entering its sunset years, the energy sector is in transition, and developed economies are simply going to have to get used to slower growth and do whatever they can to boost productivity and workforce numbers.
The slower growth in developed economies may seem surprising, given the explosion in innovation and technology that has given rise to companies like Google, Apple, Amazon and Tesla.
“Even though there might be good productivity, we are in for a slower growth scenario than what we got used to, and that’s primarily a demographic thing,” Poloz said at the November 1 BC Business Summit.
Although global economic growth is expected to pick up, improving from 2.8% in 2016 to an estimated 3.5% in 2018, the longer-term trend is for slower growth.
For the last two years, Canada’s gross domestic product grew about 1%, thanks in no small part to the oil price shock and wildfires that have ravaged Alberta’s economy. Even when Canada’s economy gets back to firing on all cylinders, its real GDP growth “speed limit” is projected to be 1.5%, says Jock Finlayson, chief policy officer for the Business Council of BC, which hosted last week’s summit.
Concerns over the long-term decline in population and productivity in developed economies explains why the federal government wants to boost immigration, has been aggressively pursuing international trade agreements and plans to spend an additional $81 billion over the next 12 years on infrastructure.
“It’s basically taking a really long-run view,” Allan Maslove, research professor at the School of Public Policy and Administration at Carleton University, said of last week’s federal budget update. “It’s not really promising anything that’s going to change very much in the next two to three years.”
Finlayson agrees: “The vast majority of this infrastructure plan over 12 years, and the increase of $81 billion, the bulk of that is actually back-loaded into the 2021 to 2028 period. So it will make very little difference to growth and employment in the short term.”
Wall Street Journal: Bank of Canada Believes Raising Inflation Target Would Be Costly
The Bank of Canada seriously considered raising its inflation target during a recent policy review before concluding that higher consumer price increases would be too costly for the economy, Gov. Stephen Poloz said.
In a speech to the Business Council of British Columbia on Tuesday, Mr. Poloz said a higher inflation target would generally result in higher interest rates, giving the central bank more room to act in the future. Ultralow and negative interest rates in many developed countries have limited central bankers’ options for stimulating their economies through rate cuts.
“However, we have learned from recent experience that there are unconventional monetary policies that give us more room to maneuver than previously believed,” Mr. Poloz said in the speech. “These include pushing interest rates below zero or buying longer-term bonds to compress long-term yields.”
The Bank of Canada announced last week that it would maintain its inflation target at 2% for the next five years, but change the way it measures core inflation. The decision was part of a regular renewal of the central bank’s inflation-control agreement with the Canadian government.
Business in Vancouver: Bank of Canada holds course on inflation policy
Bank of Canada Governor Stephen Poloz is banking on the “low probability” that Canada will suffer a major economic shock and is holding the central bank’s inflation targets for another five years.
And that means continued low nominal interest rates – possibly even negative interest rates, if that unexpected shock ever does come.
The Bank of Canada recently renewed its inflation targets for another five years, which aim to stick with an average inflation rate of 2%.
At a keynote speech at the BC Business Council’s BC Business Summit on November 1, Poloz explained to a sold-out crowd of business people why the Bank of Canada thinks its inflation targets are an effective tool that does not need recalibration.
“Canadian businesses and households have reaped the rewards of reduced uncertainty, helping them make spending and investment decisions with more confidence,” Poloz said.
Poloz said the Bank of Canada has flirted with the idea of raising its inflation target, which would mean higher nominal interest rates. That would give the central bank more room to manoeuvre in economic crises, because it could lower rates to stimulate spending.
But Poloz said higher interest rates would amount to “a higher inflation tax on the economy.”
“I think of this as paying dearly, every day, for insurance against the low probability risk that another very large macroeconomic shock could occur in the future,” he said.
He said new unconventional monetary policy tools – negative interest rates, for example – “give us more room to manoeuvre than previously believed” should they be needed.
Jock Finlayson, chief policy officer for the BCBC, said the central bank’s five-year renewal of its inflation targets is the right thing for the Canadian economy.
“What he’s saying is we’ve got a framework that’s worked in Canada,” Finlayson told Business in Vancouver. “We’ve got inflation expectations anchored around 2%. We want to keep it there.
“I think staying the course is the right move.”
Montreal Gazette: Trudeau government wants to bump up number of immigrants to B.C.
B.C. will receive between 39,000 and 42,000 immigrants and refugees annually under the Trudeau government’s ambitious plan unveiled Monday to bring in a minimum 300,000 newcomers to Canada annually.
The federal Liberal government had already declared its intention to reach the 300,000 threshold this year, which if achieved would mark the first time since just before the First World War that the total number of immigrants and refugees hit that mark.
Immigration Minister John McCallum said Monday it will be the target again for 2017 — and become a “baseline” for subsequent years.
“The 2017 levels plan will put Canada in a strong position for the future and support our overall economic and social development as a country,” McCallum said in a statement.
The 2017 total is made up of an estimated 172,500 economic immigrants, primarily skilled workers and professionals.
Another 84,000 will be “family” reunification applicants such as spouses, children, parents, and grandparents. The remainder will comprise 40,000 refugees and 3,500 people admitted on “humanitarian and compassionate” grounds.
In 2016 the target was 160,600 from the economic class, 80,000 from family class, 55,800 refugees, and 3,500 under the “humanitarian and compassionate” category.
While McCallum noted that he’s increasing the number of economic class immigrants in 2017 compared to 2016, in fact the Liberals intend to essentially match the former government’s total number of economic immigrants accepted in 2015, which came to 170,384.
B.C.’s business community had a lukewarm reaction to the figures, noting that the government hasn’t responded adequately to the need for more skilled foreign workers.
The target for economic class immigrants “falls a little bit short of what we’d like to see,” said Ken Peacock, chief economist for the Business Council of B.C.
“Our member companies continue to report a large level of difficulty hiring people, and an increasing need to look to overseas markets for top talent.”
Vancouver Sun: New Trudeau Senate appointee Yuen Pau Woo has both his fans … and panned in B.C.
[Excerpt] But a business community spokesman said Woo’s appointment is in fact a positive contribution to Canada’s economic interests.
Woo, who was en route to Canada from India Thursday and unavailable for comment, will help B.C. and the rest of the country take advantage of the “huge shift” in the global economy towards Asian markets, said Greg D’Avignon, president of the Business Council of B.C.
“It was an inspired choice.”
He pointed out that Woo, as head of the government- and private sector-supported HQ Vancouver, was instrumental in bringing eight head offices to Vancouver over the past 18 months.
Vancouver Sun: Help us or we may leave Vancouver, Lululemon tells Ottawa
[Excerpt] But economist Jock Finlayson, the business council’s executive vice-president, said Lululemon — operating in a country with a relatively small apparel industry — is the kind of company that needs to headhunt overseas.
“Canada needs well-educated and highly skilled foreign workers to help grow our companies and drive innovation, but the ‘regular’ immigration program tends to be very difficult to use to get this kind of talent, especially in a world where employers can’t wait 18-24 months to bring on the right person,” he told Postmedia in an email.
Ken Peacock on Roundhouse Radio
[14:30] BCBC Chief Economist Ken Peacock discusses the latest BCBC column in Business in Vancouver which delves into the province's need to cultivate more large companies in BC.
Vancouver Sun, Vaughn Palmer: B.C. businesses lobby for value-added tax, minus HST furor
The B.C. Liberals face growing pressure from the business community to reform the provincial sales tax to stimulate investment and improve productivity, particularly in the manufacturing sector.
But as business leaders themselves acknowledge, the politicians need to avoid reviving the backlash over the ill-advised move to harmonize the provincial sales tax with its federal goods and services counterpart.
The chamber’s concerns about the erosion of B.C.’s competitive position were echoed in a submission from the Business Council of B.C. While acknowledging that the province currently leads the country in jobs and growth, the council cited some longer term obstacles to investment in the resource industries and manufacturing.
“This is especially true of industries operating on the land base where First Nations claims, permitting and environmental rules, high and still rising energy costs, and social licence, poses challenges for existing operations and make it hard for companies to sanction new investment,” said the brief.
“Manufacturing for the most part is also at a competitive disadvantage. Among all developed country jurisdictions, B.C. now has one of the highest aggregate business tax burdens as measured by the average “marginal effective tax rate” for the business sector as a whole.
Such are the business council’s concerns, that it recommends the government postpone a promised one-point reduction in the corporate income tax.
Instead the estimated $275 million in tax room should be used to “finance new measures designed to spur business capital spending, innovation and growth and offset some of the damage that the restored PST regime has done to the province’s overall investment climate.”
For starters, the council would eliminate the sales tax on the electricity purchased by industrial and commercial firms, particularly those trading internationally. Then, in keeping with the value added model, begin lifting the PST on machinery, equipment and other business inputs.
“The PST will raise more than $6 billion in the current financial year,” says the council. “Some 40 per cent of this comes from tax levied on business inputs, everything from machinery and fixtures to construction materials, vehicles and legal services.”
Hence the call for the government to “reduce and over time eliminate the PST on business purchases of all types of machinery and equipment, software, vehicles and telecommunications and data services.”
The goal being to “stimulate investment in up-to-date capital equipment and the digital and other communications-related technologies that are fundamental to driving productivity gains and improved operational performance.”
The business council’s recommendations to the legislature committee were a short-form version of a longer brief to a second panel, the government-appointed commission on tax competitiveness.
Like the legislature committee, the commission will report out later this fall with recommendations that could be incorporated into the next provincial budget, due in February.
The Province: B.C. lumber towns braced for U.S. trade assault
B.C. is bracing for pain as the U.S. lumber industry stands poised to launch a punitive softwood lumber trade battle as early as Thursday.
That’s when a one-year “standstill” agreement tacked onto the 2006 Canada-U.S. Softwood Lumber Agreement expires, opening the door to years of costly litigation and likely mill closures and job losses.
Economists say Metro Vancouver is largely insulated from the economic impact, thanks to growth in sectors like housing construction and high tech.
“Much of the growth we are seeing in B.C. is urban-based, and urban areas of the province will not feel much impact from reduced logging and lumber production,” said economist Jock Finlayson, executive vice-president of the Business Council of B.C.
“The interior and the north will feel most of the pain.”
While B.C.’s economy overall will be hurt, the trade dispute won’t drive the province into recession because of other sectors like tourism, the film and TV industry, and the partially-recovering mining sector, he said.
Vancouver Sun: Tsawwassen Mills mall is a sign of 'reconciliation in action,' says local First Nation chief
[Excerpt] The mall’s opening comes a few weeks after the Business Council of B.C. and the B.C. Assembly of First Nations signed a new formal agreement designed to help lift indigenous communities out of poverty and build the province’s economy.
Council chair Marcia Smith, a senior vice-president with Teck Resources Limited, described the memorandum of understanding as the first of its kind in Canada and said it would give investors more confidence in B.C.-based projects.
“We are going to work together to build shared understanding of aboriginal rights and title issues, economic opportunities and the priorities of First Nations communities,” she said.
Reconciliation is a key theme of the memorandum. Gottfriedson pledged his commitment to the 94 recommendations of the Truth and Reconciliation Commission, and promised he would not support economic development that conflicted with the needs of indigenous people or threatened the environment.
The memorandum also contains a commitment to erasing some of the disadvantages First Nations face in terms of education, health care and social supports. After the signing, Gottfriendson said he hoped the agreement would bring opportunities for training and employment.
Vancouver Sun: Innovators need help to keep driving the B.C. economy
[Excerpt] In the past decade, high-tech was B.C.’s fastest growing industrial sector, according to B.C. Stats, but there remain barriers to starting and scaling up good business ideas.
The Business Council of B.C. in a report last month said the industry is limited particularly by a shortage of workers, locally and globally, and it called on the province to make innovation a priority through policy changes to encourage growth, to help B.C. businesses export, to use public sector procurement to spur businesses, to improve education, training and immigration, and to make tax changes to attract investment.
“There is no question that talent belongs on the top of the list,” said the report’s author, Jock Finlayson.
Attracting and retaining workers is the biggest challenge for B.C. in the innovation sector because countries worldwide are trying to attract the same trained employees.
The province needs to increase post-secondary funding of the STEM disciplines — science, technology, engineering and mathematics — especially engineering “because engineers are critical to enable companies to grow,” he said.
Finlayson said it’s important not only for the province to increase the number of workers trained for entry-level positions in the digital world, but to produce more masters and PhD students who have the vision to build companies beyond small startups.
“Grad students are increasingly required for growing an innovation economy,” he said.
And more foreign graduate students should be automatically allowed to stay in Canada on working visas once they’ve completed their degrees, said Finlayson.
A federal program already allows the province to fast track entry for 5,000 immigrant workers a year based on education, training and experience gained in Canada or elsewhere, through the Immigration Canada’s provincial nominee program.
“We’d like to see that doubled,” he said.
BNN: BC Premier Christy Clark counts on LNG to drive economy after real estate-fuelled boom
[Excerpt] While it is true B.C. has by far the strongest provincial economy in the country, Clark failed to mention a huge proportion of that growth has been borne on the back of what most economists consider unsustainable gains in the Vancouver real estate market. According to the Business Council of British Columbia, roughly 40 per cent of economic growth in that province is directly related to housing.
B.C. has taken shots at Alberta’s overreliance on energy before. In its February speech from the throne, the provincial government set its legislative agenda for the year by warning it must “stay vigilant” to avoid the mistakes its neighbour to the east has made when “over the decades, Alberta lost its focus.”
Despite that cautionary tale, B.C. appears no more focused today on avoiding a very similar fate to the one Alberta is now facing.
“The hot housing sector, while boosting the economy today, is creating a somewhat unbalanced economic growth dynamic in the province,” Jock Finlayson, chief policy officer for the British Columbia Business Council, wrote in a July 26th report. “It also leaves B.C. vulnerable to potentially adverse market shifts.”
Financial Post: Seattle and Vancouver look to create a West Coast hub for innovation
The Emerging Cascadia Innovation Corridor Conference held in Vancouver last week was the next step in Seattle’s and Vancouver’s drive to create a West Coast hub for innovation to help businesses in the region compete globally.
Keynote speakers, including Bill Gates Microsoft, co-founder and co-chair of the Gates Foundation; Satya Nadell, Microsoft CEO; Brad Smith, president of Microsoft; BC Premier Christy Clark; Washington Governor Jay Inslee; and Seattle Mayor Ed Murray, discussed the need for greater connectivity and alignment around education, biosciences, workforce, health care, transportation, and natural resources.
Greg D’Avignon, president and CEO of the Business Council of British Columbia, said one key focus of the initiative is fostering relationships both within startup communities and between investors and entrepreneurs to increase the availability of capital and other support.
“There’s a real opportunity for small businesses when you have larger companies like Microsoft, Amazon, Starbucks and Telus becoming incubators for small business vendors and service providers. Bigger companies provide access to talent, capital and the ability to scale to reach international markets,” he said.
D’Avignon claims Vancouver, and British Columbia in general, has more startups than any other region in Canada, with particular expertise in digital entertainment, special effects, biotech, life sciences, genomics and cancer care. “The University of British Columbia, for example, is a leading incubator for creating ideas for new companies moving forward,” he said, adding, Washington State is Number 1 for startups among the 50 states.
Vancouver Sun, Peter O'Neil: Don't 'sabotage' Canada on LNG, says B.C. business group
The Trudeau government would “sabotage” an enormous Canadian advantage in world markets by capitulating to environmentalist pressure to block an $11.4-billion West Coast liquefied natural gas project.
That is the B.C. business community’s warning in a letter to Environment Minister Catherine McKenna as the federal cabinet prepares to make its final decision on the Pacific NorthWest LNG proposal.
On Monday, Ottawa is expected to announce its verdict on a project that is a key component of Premier Christy Clark’s strategy to boost the B.C. economy and her chances of getting re-elected next spring.
The federal cabinet is expected to discuss the matter at a cabinet meeting Tuesday.
“We are writing to express our concerns with ongoing negative commentary from certain environmental groups who are opposed to fossil fuel development in Canada — and specifically, to proposed energy projects in British Columbia,” said Greg D’Avignon, president of the Business Council of B.C., in a letter that went to senior members of the federal and B.C. cabinets.
D’Avignon said that, contrary to arguments from environmentalist groups, Canadian LNG exports would allow Asian countries to transition away from more carbon-intensive methods of generating electricity. Such exports would also stimulate the national economy and create jobs and wealth, he argued.
If Canada doesn’t export LNG, other countries with worse environmental records would step in to fill the void, he said
“So it is difficult to understand why Canadian policy-makers would want to sabotage the country’s comparative advantage in energy resources,” the letter states.
BIV Radio: Ken Peacock
[43:25] BCBC's Chief Economist Ken Peacock joins BIV Roundhouse Radio to talk about his latest column in Business In Vancouver and why real estate is acting as B.C.’s economic buffer during the current energy downturn.
Tech Vibes: Vancouver, Seattle Eager to Create 'Cascadia Innovation Corridor' Between Two Cities
The creation of a new global hub for innovation and economic development was the focus of a conference held this week in Vancouver.
The Emerging Cascadia Innovation Corridor Conference brought together business and government leaders to explore the potential for joint partnerships in education, transportation, university research, human capital and other areas. The conference was jointly hosted by the Business Council of British Columbia, the Washington Roundtable and Microsoft.
Leaders on both sides of the border acknowledged the opportunity to create a single interconnected region that could be more competitive in today’s global economy—and took action to deepen relationships and strengthen partnerships. At the conference, Washington Governor Jay Inslee and British Columbia Premier Christy Clark signed a formal agreement that committed the two governments to work closely together to “enhance meaningful and results-driven innovation and collaboration.”
Seattle and Vancouver, the two cities at the heart of the new initiative, share a number of complementary strengths. And yet, according to a new Boston Consulting Group (BCG) study released at the conference, the level of connectedness between the two cities remains remarkably low for two cities so close together. While only 120 miles or 190 kilometers apart they behave more like cities that are thousands of miles apart.
“In an increasingly competitive global market for talent and capital, harnessing our collective strengths and the power of innovation will drive greater productivity and business growth across the region,” said Greg D’Avignon, Business Council of British Columbia President and CEO. “We welcome leading thinkers from both sides of the border to British Columbia to discuss how improved collaboration will create greater prosperity for the benefit of all residents in B.C. and Washington State.”
The region has the “potential to become an important innovation corridor,” but doing so will require regional leaders work together, the study said. This could be possible through sustained collaboration aided by an educated and skilled workforce, a vibrant network of research universities and a dynamic policy environment.
604 Now: Bill Gates In Vancouver To Headline Conference
Microsoft founder, Bill Gates, will be attending the Emerging Cascadia Innovation Corridor Conference today in Vancouver.
Among B.C. Premier, Christy Clark, the Governor of Washington, Jay Inslee, and Microsoft CEO, Satya Nadellaare, will also be in attendance.
The conference will have a heavy focus on increasing connections between Vancouver and Seattle, with talks about “education, the workforce, health care, transportation and natural resources”, according to CBC.
Organized by the Business Council of British Columbia, the conference will hopefully allow for our province to establish a better link to places like Seattle, in order to work closely as one region.
Navdeep Bains, Canada’s Economic Development Minister told reporters that we need to “recognize that we live in a globally connected world.” With global companies becoming local competitors, Bains emphasized that having a stronger connection to the U.S. will create more networks.
Yahoo Finance: New Regional Effort Aims to Establish Cascadia Innovation Corridor
British Columbia and Washington leaders come together to strengthen collaboration, create cross-border opportunity
The creation of a new global hub for innovation and economic development is the focus of a conference being held today in Vancouver.
The Emerging Cascadia Innovation Corridor Conference brings together business and government leaders to explore the potential for joint partnerships in education, transportation, university research, human capital and other areas. The conference is jointly hosted by the Business Council of British Columbia, the Washington Roundtable and Microsoft Corp.
Leaders on both sides of the border acknowledged the opportunity to create a single interconnected region that could be more competitive in today's global economy and took immediate action today to deepen relationships and strengthen partnerships.
Seattle and Vancouver, the two cities at the heart of the new initiative, share a number of complementary strengths. These include a high quality of life, diverse communities, skilled and well-educated workforces, and strong economic and social ties to Asia. And yet, according to a new Boston Consulting Group (BCG) study released at the conference, the level of connectedness between the two cities remains remarkably low for two cities so close together. While only 120 miles or 190 kilometres apart they behave more like cities that are thousands of miles apart.
"In an increasingly competitive global market for talent and capital, harnessing our collective strengths and the power of innovation will drive greater productivity and business growth across the region," said Greg D'Avignon, Business Council of British Columbia President and CEO. "We welcome leading thinkers from both sides of the border to British Columbia to discuss how improved collaboration will create greater prosperity for the benefit of all residents in B.C. and Washington State."
CBC: Bill Gates in Vancouver for Emerging Cascadia Innovation Corridor Conference
Politicians, CEOs and academics from the Pacific Northwest will meet in Vancouver today to discuss creating a hub for innovation in the region.
B.C. Premier Christy Clark, Washington Governor Jay Inslee and Microsoft founder Bill Gates and Microsoft CEO Satya Nadellaare all scheduled to attend the Emerging Cascadia Innovation Corridor Conference.
The conference, which was organized by the Business Council of B.C., will focus on increasing connections between Vancouver and Seattle.The agenda includes talks on education, the workforce, health care, transportation and natural resources.
Canada's Innovation, Science and Economic Development Minister Navdeep Bains says we live in a globally connected world, so it's important to explore ways that Vancouver and Seattle can work more closely as one region.
"Global companies are becoming local competitors. We need to recognize that we live in a globally connected world," Bains told reporters after speaking to the Vancouver Board of Trade Monday.
"Any kind of relationship we can have with the United States for example, in this particular case, or other jurisdictions, to create those networks, to create those clusters, is something we should explore."
Bains said it's crucial to strengthen domestic talent through education and training, saying that learning to code is now equally as important as learning to read or write.
But he said immigration is also key to growing Canada's economy. He touted billions in investments the government has made in upgrading institutions and buildings and in research funding for individuals.
"Those kinds of investments attract the best and brightest to come to Canada, and then if we create an environment for them to grow their company, succeed and we provide a good quality of life, there's a good chance we'll be able to retain them."
He stressed that opening doors to immigrants doesn't mean taking away jobs from Canadians. The government wants to foster an environment for newcomers to create companies, he said.
"When individuals start up companies and grow companies, then they employ Canadians. That's the idea. We want to create an innovation culture."
Globe and Mail: Home sales eclipse resources as B.C.’s top source of revenue
British Columbia will haul in more tax revenue from the sale of homes this year than its combined revenues from the province’s historical economic foundation of mining, energy, forestry, Crown land tenures and natural gas.
The first fiscal update on this year’s budget, released on Thursday by Finance Minister Mike de Jong, forecasts the property transfer tax will bring $2.2-billion into the treasury, a massive increase from the $1.2-billion predicted in the budget introduced in the spring. Direct revenues from the province’s top five resources are forecast to total $1.8-billion.
Economist Jock Finlayson, executive vice-president of the Business Council of British Columbia, cautioned that the province’s economic growth, which is leading the country, is heavily reliant on a housing boom that is susceptible to a downturn.
“We estimate the residential real estate complex is generating up to 35 to 40 per cent of all economic growth in the province,” Mr. Finlayson said in an interview. That includes new home construction, the renovation industry, and the spin-off industries of intermediaries – lawyers, realtors, home inspectors and others – who profit from the turnover of real estate.
“For the B.C. government, it is producing something of a revenue bonanza. The question is, is it healthy in the long run to be dependent on it, and the answer is no, because you are vulnerable to a painful correction.”