News Releases and Op-Eds
Finlayson Op-Ed: Canada Counting on U.S. Consumer for Economic Growth (Troy Media)
As Justin Trudeau and his euphoric Liberal colleagues get ready to form a new government in Ottawa, they have reason to worry about the macroeconomic picture. But good news south of the border could have a ripple effect in Canada.
In recent weeks, several forecasters, including the Bank of Canada, have (again) downgraded their growth projections for the Canadian economy. This comes amid a deterioration in the international economic outlook, which also continues to disappoint.
It is clear that the world oil price collapse, in tandem with the downturn in many other commodity markets, has hammered Canada’s resource-centric economy. That has triggered a sharp fall in the nation’s terms of trade, and brought on job and capital spending cuts in the energy and mining industries and many of the service sectors that supply them. For most commodity producers, it is hard to see much light at the end of today’s dark tunnel. For Canada as a whole, mustering an annual economic growth rate of even 2 per cent (after inflation) may prove to be a formidable challenge, particularly given that apart from low commodity prices our economy will also be held back by record levels of household indebtedness and stretched housing valuations.
How Canada fares in 2016-17 will hinge, in large part, on developments in the United States. While America has also lost a step at a time of choppy world growth, there is an underlying momentum that should keep its economy on a solid, if unspectacular, expansion trajectory.
Armed with a more competitive exchange rate and a host of domestic industries hungrily looking beyond our own somnolent market for new business, Canada stands to benefit as the giant $18-trillion U.S. economy chugs along.
Finlayson Op-Ed: Get ready for the next big boom in U.S. housing (Financial Post)
One of the most striking economic developments in the United States since 2008 has been a pattern of generally depressed household formation. Households are created when young people leave the family nest, when new migrants arrive in a country (or a region), and when couples or roommates split (resulting in two households where one existed before). Deaths, the movement of the elderly into institutional care, population out-migration, and marriage are among the factors that cause the number of households to decline.
Household formation plays a central role in driving the demand for housing and other goods and services tied to the emergence of households – everything from furniture, carpets and cable and internet subscriptions to mortgage appraisals, home renovations, and cleaning and landscaping services.
RELEASE: Business Council Budget Recommendations Designed to Strengthen BC’s Competitiveness and Attract Investment
Global economic uncertainty places pressure on BC exports
Business Council of British Columbia has shared its views on the economy and some initial recommendations on Budget 2016 with the Standing Legislative Committee on Finance and Government Services (the Committee). The Council encourages the Committee to take note of the current uncertain global economy and to recognize the need to bolster the province’s competitiveness – particularly in the traded industry clusters that are central to BC’s prosperity.
Release: Business Council welcomes the conclusion of the Trans Pacific Partnership Negotiations
New opportunities for Canada's Gateway to the Asia Pacific
Vancouver, BC - British Columbia business leaders welcome the successful conclusion of the negotiations to establish the Trans-Pacific Partnership (TPP). Canada and 11 other Asia-Pacific nations have been working toward a TPP agreement for more than two years.
“Given British Columbia’s position as the country’s gateway to the Asia-Pacific, we recognize the importance of ensuring that Canada is part of this landmark trade and investment agreement with countries that collectively are home to more than 800 million people and generate $28 trillion in annual economic activity,” said Greg D’Avignon, President and Chief Executive Officer of the Business Council of British Columbia. “The Business Council believes the TPP will help the Canadian and the BC economies grow by removing tariffs and other barriers, enabling more of our export industries to build new business, and strengthening the position of Canadian companies in global supply chains encompassing commodities, manufactured goods, and tradable services.”
Finlayson Op-Ed: 3 Reasons we don't need to worry about inflation (Troy Media & Business in Vancouver)
Across most of the advanced economies, inflation is running well below the rates targeted by central banks. In the United States, the principal inflation measure tracked by the Federal Reserve sits at barely 1 per cent, despite an expanding economy and a tightening labour market. In Japan and Eurozone, central banks have set policy interest rates at zero and are aggressively pumping money into the economy to avoid deflation – defined as a generalized fall in prices. In both the UK and Canada, the short-term policy interest rates directly controlled by central banks remain near all-time lows. Almost everywhere, financial markets seem to be discounting the prospect of higher inflation. As Bank of England Governor Mark Carney recently observed, even today, some six years after the bottom of the 2008-09 slump, “there are profound secular and cyclical disinflationary forces at work in the global economy.”
Looking ahead, an argument can be made that we should worry less about the prospect of escalating costs and prices across multiple markets for goods, services, labour, and raw materials – i.e., about inflation. There are several reasons why.
Peacock Op-Ed: A Diverse Manufacturing Sector Helps Underpin BC’s Resilient Economy (Business in Surrey)
In British Columbia, manufacturing is a substantial part of the provincial economy. The processing of resources is highly visible so manufacturing in BC is sometimes perceived as being dominated by resources. But the reality is non-resource manufacturing, measured in terms of both output (GDP) and employment, is actually larger than resource-based manufacturing.
In 2014, real GDP in the non-resource manufacturing sector amounted to $8.9 billion (4.4% of BC’s total GDP), and for resource-based manufacturing the comparable figure was $5.7 billion (2.8% of GDP). The simple delineation is made to help highlight the fact that BC’s manufacturing sector is diversified. Comparisons of this sort are not especially meaningful because they depend on what industry segments are lumped together. Resource-based manufacturing captures a handful of industries (wood products, pulp and paper, petroleum and coal product manufacturing, and primary metal manufacturing), whereas the non- resource grouping contains 14 different industries.
The export story is arguably the biggest economic benefit of manufacturing. In 2014, BC’s non-resource manufacturing exports amounted to approximately $9 billion, equal to one-quarter of all international merchandise exports. Since 2000, BC’s non-resource manufacturing export shipments have climbed by 30%, whereas the value of all other exports is basically unchanged from the early 2000s. Although non-resource manufacturing was hit by the 2008-09 recession, the data suggests that the sector is not subject to the same gyrations as most resource-based industries.
Finlayson Op-Ed: Renewables, fossil fuels will share energy landscape (Business in Vancouver)
Is the world in the midst of an accelerating migration away from fossil fuels toward much greater reliance on carbon-free energy? If one takes seriously the speeches of many politicians or the content found on the web sites of environmental advocacy organizations, the temptation is to answer “yes.” The reality, however, is more complex.
Important shifts in energy production and use are under way, but the magnitude and timing of any overall global “energy transition” are apt to be less dramatic than many believe. Growing energy demand, the vast scale of the world’s existing energy system, and the tens of trillions of dollars of embedded capital that underpin it all stand in the way of rapid change.
That said, there is evidence of an incremental move away from fossil fuels as a primary energy source, in favour of low/no-carbon forms of energy. Over time, natural gas and renewables will comprise rising proportions of the world’s energy supply, while the shares of oil and coal will decline. However, because energy demand will be increasing and natural gas use is expected to double by 2040, this does not necessarily equate to an absolute reduction in the quantity of fossil fuels in the global energy system in the short- to medium-term.
Finlayson & Peacock Report: BC holding its own in economic headwinds (Business in Vancouver)
Against the backdrop of a choppy and risk-prone global economy and slowing growth in Canada, B.C. is poised to be atop the provincial growth rankings this year.
Finlayson Op-Ed: Adding up empty economic victories in a land of cheap money (Troy Media, Business in Vancouver, and Plant)
The Bank of Canada’s recent decision to trim its short-term policy interest rate by another 25 basis points – taking it to a near record low level of 0.5% – acknowledges that the energy-related downturn in capital spending and exports in Canada has been greater than it was expecting at the beginning of the year – and the pain is likely to persist.
Finlayson Op-Ed: Planning Ahead for Ongoing Change? (PeopleTalk Magazine)
Most people are aware that the population in Canada and other western countries is aging, that longevity is increasing, and that the front-end of the large baby boom generation has started to retire. Fertility rates have also fallen, which means the future supply of workers will be under additional downward pressure even as the ranks of seniors swell. But how quickly will our population grow, and age, in the next 20 years? Will employers soon face a dramatic shortfall of working-age British Columbians?
Finlayson Op-Ed: BC economy will soon hit $250 billion (Troy Media and Business in Vancouver)
A steadily expanding population and ongoing modest economic growth are combining to propel the value of both spending and production in British Columbia to ever higher levels. As a result, we are on the cusp of a significant milestone: by the end of this year or early in 2016, the value of all measured spending and production in B.C. will reach one-quarter of a trillion dollars ($250 billion).
D'Avignon Op-Ed: Great News for British Columbia
Remember June 11and 12, 2015. We will look back on this 24 hour period years from now as a point in which B.C. started to see a material change to its economy. Specifically, it was when some $44 billion worth of investment decisions were made in two separate projects that will strengthen B.C. as a significant player in two global sectors: energy and shipbuilding.
Finlayson Op-Ed: Canada flirting with recession (Troy Media, Business in Vancouver)
The latest economic growth report from Statistics Canada casts a cloud over the country’s economic outlook for 2015. Real gross domestic product (GDP) fell at a 0.6 per cent annualized rate in the first three months of the year, considerably worse than even forecasters of a pessimistic bent were expecting. Digging into the details, it is clear that the slump in global oil prices is taking a measurable toll on Canada’s energy-centric economy.
Non-residential investment plunged by 15 per cent in Q1, led by sharp cuts in capital-spending by the oil and gas industry. In recent years, the energy sector has accounted for more than one-third of all non-residential investment, as well as for roughly one quarter of Canada’s merchandise exports. So the epic downturn in oil and natural gas markets is dampening overall private sector capital outlays and weighing heavily on Canada’s export receipts.
Harsh winter weather also played a role in the gloomy Q1 report -- consumer spending came in below consensus, as many Canadians apparently decided to stay indoors.
Economists define a “recession” as two consecutive quarters of declining real GDP. We are half way there, and some recent economic data signal further softness into the second quarter.
Finlayson Op-Ed: Tax policies discourage small business from getting bigger (Troy Media)
The latest federal budget confirms and reinforces what seems to be an enduring belief among many Canadian policy-makers that it is better for enterprises to stay small than to build up their top lines, bottom lines and employee head counts. According to Budget 2015, the Conservative government plans to lower the federal small business income tax rate from 11 per cent to 9 per cent by 2019. The rate reductions will come in four half-point steps, starting in January 2016. There is to be no change in the general federal corporate tax rate on income above the small business threshold level ($500,000) – that rate remains at 15 per cent.
All of the provinces follow the same general approach as Ottawa, by setting their small business tax rates below the rates charged to medium-sized and larger firms. British Columbia, to take one example, presently levies a 2.5 per cent small business tax, while imposing an 11.0 per cent tax on earned income above the threshold amount. The net result is summarized in the accompanying table: the combined federal/B.C. tax rate on small business income is currently about half of the rate on other income, with the gap set to widen over the next few years.
Finlayson Op-Ed: Workers’ bargaining power to rise as labour shortages proliferate (Business in Vancouver)
The critical role of skills in a modern economy and the fact that many employers continue to report difficulties in finding qualified personnel raise questions about the future supply of workers. A number of business leaders have voiced alarm about current and/or potential labour shortfalls. Some worry that the overall economy could be de-railed by widespread shortages of workers.
In thinking about this topic, it is useful to begin by considering the larger economic picture and the lessons from past experience. Concerns about labour shortages are not new, tending to wax and wane with the state of the economy. Temporary labour supply-demand imbalances in particular occupations, regions, or industries are not uncommon. But as an empirical matter, serious and persistent shortages of workers have been rare in Canada. The reason is that the emergence of imbalances in parts of the labour market typically leads to institutional, behavioral and policy responses that, over time, serve to eliminate or mitigate the effects of shortfalls in the supply of workers.
RELEASE: Business Council of BC welcomes Canada's balanced budget,
notes caution on the country's economic outlook
The Business Council of British Columbia welcomes the Government of Canada's balanced budget which includes several new budget measures to support a diversified economy and to advance economic growth for the country. The government deserves credit for moving steadily toward a balanced budget, although with a slim $1.4 billion surplus in 2015-2016, following the global financial crisis of 2008-09 and the current period of relative economic uncertainty.
Finlayson Op-Ed: The Sobering Reality Behind Business Incentives (Troy Media)
Recent news stories from both sides of the Canada-U.S. border highlight the growing role of business incentives and “subsidies” in shaping the climate for corporate location and expansion decisions.
The big three U.S. automobile producers are in the midst of downgrading their presence in Ontario as they build new plants in various American states as well as Mexico. Asian and European automobile producers are also stepping up capital spending in the U.S. and Mexico.
One of the factors behind this trend is the rich incentive packages provided by U.S. state and local governments keen to secure auto-related manufacturing plants and jobs. While Ontario and the Canadian government have also been prepared to spend taxpayers’ money to lure automobile investment, so far they have been unwilling to match the stupendous sums on offer in states such as Kentucky, South Carolina, Tennessee, and Michigan.
Finlayson Op-Ed: Post-secondary education still the ticket to better jobs (Troy Media)
It is almost one year since the B.C. government unveiled details of its plan to re-engineer the post-secondary education (PSE) and training system. The Liberal government’s “Skills for Jobs Blueprint” will see additional funding directed to expand capacity to educate/train people in high-demand occupations – and fewer dollars available for programs in other parts of the system. An important factor behind the revamp is a belief among policy-makers that the “supply” of and “demand” for skills are out of alignment in the contemporary labour market.
Statement: Business Council supports new minimum wage policy
“The Business Council supports the government’s decision today to implement a modest increase of the statutory minimum wage of $0.20 to $10.45 and to index future increases to the consumer price index as the Council has previously advocated,” said Jock Finlayson, Executive Vice President and Chief Policy Officer, Business Council of British Columbia.
“This brings British Columbia’s minimum wage policy in line with most other jurisdictions in Canada and provides a fair and predictable approach to future increases that businesses can plan around.
Whitworth Op-Ed: Liquefied Natural Gas is a Generational Opportunity (Vancouver Sun)
The debate about the future of liquefied natural gas in British Columbia is generating plenty of heat, but often too little light. A casual observer can be forgiven if he or she is just a bit confused about whether LNG will come to B.C.
Strip away the rhetoric, however, and a truth remains: In a growing world economy hungry for cleaner forms of energy, the market for B.C.’s natural gas remains strong.
As CEO of Seaspan ULC and chair of the British Columbia Business Council, I think it is important we remember this when considering LNG’s potential to shape our province for the better.