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Economy

As trusted economists and policy advisors to business and government leaders, the Council relies on sound, evidence-based analysis to inform its policy recommendations. Through diligent tracking of BC’s economic performance, we help identify the opportunities and challenges the province must navigate in order to reach its full potential.

 

Finlayson Op-Ed: Memo to Finance Minister Bill Morneau (Troy Media)

Congratulations on your election to the House of Commons as the MP for Toronto Centre and your appointment as Minister of Finance.  Business leaders across Canada wish you well as you come to grips with the economic challenges that lie ahead.

One challenge is that Canada appears to have entered a period of sub-par growth.  Our economy lost ground over the first half of 2015, largely due to the impact of sharply lower oil prices together with weakness in the markets for many other commodities that form a large part of Canada’s export basket.  More recent data signal a pick-up in activity over the summer and into the fall.  However, for 2015 as a whole, inflation-adjusted gross domestic product (real GDP) is likely to increase by perhaps 1 per cent, down from an average of 2.2 per cent over 2013-14.

The economy should gain a bit of momentum through 2016, in response to the ongoing expansion in the United States, the low Canadian dollar, and continued accommodative monetary policy.  Real GDP is expected to climb by 1.5-2.0 per cent next year.  But looking further ahead, Canada also faces stiff economic headwinds from lower-for-longer commodity prices, record high levels of household indebtedness, and weak overall business investment. A slow growth macro-economic environment lends support to your government’s plan to expand infrastructure spending over the next few years.   But while spending more on infrastructure is a sound idea, the most convincing reason for doing so is not to boost short-term aggregate demand, but instead to make Canada’s economy more productive and competitive.  This includes ensuring that critical infrastructure is in place to enable our resource, manufacturing and tourism industries to connect with and efficiently sell into global markets.

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The Myth and Reality of a Clean Economy and Jobs

Clean Energy Canada (CEC) recently released a report which purports to show the BC economy will continue to thrive if the province’s carbon tax is steadily ramped up and a long list of additional regulations and other measures are introduced to further reduce carbon emissions in the province.

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The Trans-Pacific Partnership – Positioning Canada and British Columbia for the Pacific Century

The October 5, 2015 announcement that 12 Pacific Rim countries, including Canada, have signed the Trans-Pacific Partnership Agreement (TPP) is good news for British Columbia. Once/if ratified by all of the signatory countries, it will take time for BC businesses to feel the full effects of the deal: elimination of some tariffs will take 10 years or more. Eventually, the global economic potential of the “TPP region” and the new areas covered by the agreement, particularly services and investor and intellectual property protections, could reshape trade flows and boost economic development in what is already the most dynamic region in the world.

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Finlayson, Ragan Op-Ed: We need a serious discussion about congestion pricing (Vancouver Sun)

In the past year, public debate in Metro Vancouver has focused heavily on how to pay for new transportation capacity. But there is a critical missing piece in this mobility puzzle. Improved transit services and more investment in roads are needed but they aren’t enough. Experience shows that we can’t just build our way out of gridlock. We won’t solve the problem of traffic congestion without also changing the underlying incentives. That’s why we need a serious discussion about congestion pricing.

This summer’s transit referendum was about how to pay for new transit investments. Its failure doesn’t signal that people are happy being stuck in traffic; nor does it signal that we are using our current infrastructure efficiently. There are several things that pretty much everyone agrees with regarding transportation in Metro Vancouver. First, traffic congestion is extremely costly: time lost in traffic costs people and businesses in the region at least $1.4 billion per year. Second, more and expanded public-transit options are necessary, as are maintenance, repairs and upgrading of existing roads and bridges. Third, those transportation investments somehow will have to be made, for neither businesses nor residents can afford to live without them indefinitely.

Another point of agreement is that traffic congestion is getting worse. Given that Metro Vancouver’s population is projected to grow by about million people over the next 25 years, one can easily imagine how bad things could get. As population and port activities increase, container truck traffic will also grow. Who pays for the time that trucks spend idling on backed-up highways and arterial roads? These time delays raise costs for businesses and increase prices for consumers. We all pay for traffic congestion.

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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.

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BC Job Market is Almost Certainly Stronger than Labour Force Survey Suggests

It has been somewhat challenging making sense of BC’s job market over the past couple of years. So far in 2015, Statistics Canada’s Labour Force Survey (LFS) shows overall job growth in the province running at a modest 0.8%, based on year-to-date data through September. Looking just at payroll employment (that is, taking self-employment out of the total job count), the number of employees is up by meagre 0.2% year-to-date, according to the LFS. The difficulty is that this puny increase in the number of employees is not consistent with other economic indicators for BC, such as strong gains in retail spending, a buoyant housing market, and a busy construction sector.

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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.

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Federal Election Economic Policy Primer

British Columbians and the rest of the country go to the polls on October 19.  In voting, they will help to set the course for the nation’s economy in 2016 and over the rest of the decade. In this pre-election briefing document, we outline some of the BC business community’s priority issues, both for the election itself and for the agenda of the federal government that Canadians will choose on October 19. 

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Submission: BCBC Pre-Budget Submission to the Select Standing Committee on Finance (Budget 2016)

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.

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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.

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October 9 - In the News this Week: Five business and economic stories affecting BC

BCBC recaps the weekly business and economic news stories from the week ending October 9 relevant to British Columbia's economy.

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Carbon Pricing, Fusion Style – Policy Issues to Consider When Carbon Taxes Meet Cap-and-Trade

While there appears to be a growing consensus on the need to price carbon, there is no consensus on the most effective means of doing so – either via taxes or trading schemes.

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Growth in the Economy = Women

Women make up half of the world’s population. Looking ahead, this means half of the potential global labour force consists of women. Potential is the key word. There are many barriers to full labour force participation by women, notably in emerging economies, but also to some extent in the advanced economies too. But suppose parity is possible. It could add a total of between $12 trillion and $28 trillion to global GDP by 2025. Over a 10 year period beginning in 2015, this would be equal to between $1.2 trillion and $2.8 trillion per year. Importantly, this “extra” economic growth would be on top of baseline forecast growth rates, which have been rather subdued of late.

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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.” 

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September 25 - In the News This Week: Five Business and Economic Stories Affecting BC

BCBC recaps the weekly business and economic news stories from the week ending September 25 relevant to British Columbia's economy.

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September 18 - In the News This Week: Five Business and Economic Stories Affecting BC

BCBC recaps the weekly business and economic news stories from the week ending September 18 relevant to British Columbia's economy.

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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.

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September 4 - In the news this week: Five Business and Economic Stories Affecting BC

BCBC recaps the weekly business and economic news stories from the week ending September 4 relevant to British Columbia's economy.

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Imagining a “Post-Inflation” World

Across most of the leading 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%, despite an expanding economy and a rapidly tightening labour market. In Japan and the 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 drop in the price level. In both the UK and Canada, the short-term policy interest rates directly controlled by central banks remain near all-time lows.

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August 21 - In the news this week: Five Business and Economic Stories Affecting BC

BCBC recaps the weekly business and economic news stories from the week ending August 21 relevant to British Columbia's economy. This week we look at: falling oil, falling markets, negative outlook for the global economy; home prices in British Columbia continue to rise; provinces move forward in developing climate plans; CHART: Canadian cities hold three spots on the list of the top five most liveable cities; and Vancouver office space vacancy spikes.

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