Short term support measures are welcome, but Canada needs bold action over the medium term as global economy strengthens
April 19, 2021 (Vancouver) - The Business Council of British Columbia recognises the seriousness of the fiscal and economic challenges Canada faces during the ongoing COVID crisis and welcomes the additional steps taken in Budget 2021 to help households and businesses navigate through the next few months. Canadians now have a more complete picture of the national government’s finances. The picture presented is of a considerably weaker government balance sheet, with the debt/GDP climbing to 50% by 2022, up from 30% just two years ago.
The budget includes measures to support Canadians, businesses, Indigenous peoples and industry in the short term and facilitate the ongoing economic recovery including, increased support for skills training, firm-scaling and innovation, and entrepreneurship. The federal government also has made a substantial commitment to the establishment of affordable, nation-wide day care in tandem with provinces willing to collaborate to reach this goal.
Absent from the budget, however, is a convincing strategy for medium-term growth that will position Canada to succeed in a fast-changing global economy by attracting and retaining talent and boosting business investment. Without measures to bolster our eroding competitive position, Canada risks falling further behind other developed nations on key metrics.
“While several initiatives announced in today’s budget will produce broad societal and economic benefits and needed supports to address household and climate challenges, the Business Council believes more must be done to build a comprehensive and competitive economic plan for growth,” says Greg D’Avignon, President and CEO, Business Council of British Columbia. “While the budget offers some good initiatives, Canada has yet to address pre-pandemic weaknesses in our economy and create the necessary policies to enable higher real wages and a more productive, growing economy over the medium term that will address mounting debt and preserve our much needed social supports.”
The global economy is returning to pre-pandemic levels of activity, lifted by a rapidly rebounding U.S. economy and strong growth in China.
“Canada is fortunate to possess many comparative advantages which, with the right policies, can be leveraged for overall economic and social prosperity in a low carbon world,” said D’Avignon. “These strengths include an educated and diverse labour force, comparatively lower-carbon energy, export goods and commodities, and key innovative sectors that merit greater policy support to scale and remain in Canada.”
Heading into the pandemic, Canada experienced several years of anemic growth in real per capita GDP along with sluggish business investment and weak capital formation that exposed structural weaknesses in our economy. Today’s budget unveiled significant spending increases and a sharply higher debt-to-GDP ratio. Our concern is that the rising debt burden will fall disproportionately on future generations.
“The federal government must begin to put the pieces in place to restore confidence and make Canada a top-tier place for investment, innovation, business growth, and opportunity,” said Jock Finlayson, Senior Policy Advisor with the Business Council of B.C. “This is necessary to improve well-being and to pay for the programs and services the federal government wants to sustain and, in some cases, expand.”
In addition, the Council is concerned the budget fails to consider the potential for future economic shocks, such as rising interest rates or some other shock to the global or domestic economy.
The Business Council of British Columbia has long called for improved access to childcare by increasing spaces and ramping up early childhood education training. Accessible and affordable childcare supports greater economic opportunity for families and individuals, particularly women. It also encourages and allows for greater workforce participation. The Council welcomes the government’s commitment to childcare funding, recognizing agreements with each province will be needed to move forward.
The Council was pleased the budget steered clear of significant tax hikes. At a time when individuals and businesses are still emerging from the economic downturn, increasing the tax burden on employers or families would be the wrong approach.
On Wednesday, April 21, the Business Council will release a full analysis of both the federal and B.C. budgets and their impact on the economic landscape.
About the Business Council of British Columbia
Now in its 55th year as the premier business organization in British Columbia, the Business Council of B.C. is a non-partisan organization made up of over 200 leading and largest companies, post-secondary institutions and industry organizations from across B.C.'s diverse economy. The Council produces exceptional public policy research and advocacy in support of creating a competitive economy for the benefit of all British Columbians.
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