Posthaste: Which party will be better for Canada’s economy? There’s one with a (marginally) better plan
The polls are truly capturing our mass disappointment with our available choices. CBC’s latest poll of polls shows Canadians are equally mistrusting of the two leading parties (Liberals at 32 per cent, Conservatives at 31.6 per cent), are somewhat concerned about income inequality (NDP at 18.4 per cent) and the environment (Greens at 7.5 per cent). Voters also have a soft spot for regionalism (Bloc at 7 per cent) and are nursing a bout of nativism (PPC at 2.5 per cent).
Given Canadian indecision, we will likely have a minority government, but CIBC chief economist Avery Shenfeld believes neither major political party, if elected, will rock the boat — especially in comparison to countries like the United States and the United Kingdom where the main political parties are poles apart on key issues.
“In like some of those chaotic situations seen abroad, to put a twist on Lincoln, a Canadian House divided against itself can indeed stand. “The upshot for investors is that with less drama in a minority outcome than elsewhere, don’t expect a huge market reaction when the results are announced.”
Still, there might be some differences among the two parties. Oxford Economics says a Conservative government would have a limited impact on the overall economy as lower income taxes would be offset by reduced government outlays.
“We would expect no change to our baseline growth forecast of 1.1 per cent in 2020 and 1.4 per cent in 2021,” according to Tony Stillo, a director with Oxford.
The Liberal plan, on the other hand, would likely boost growth by 0.1 percentage point in 2020 and 0.2 percentage points in 2021 via deficit-financed tax cuts and transfers to households. “This would boost our call for GDP growth to 1.2 per cent in 2020 and 1.6 per cent in 2021 although the Bank of Canada might be tempted to maintain tighter monetary policy,” Stillo said.
Keep an eye out on the loonie, too. The Canadian currency now stands as the strongest major currency in the world in 2019, rising 3.8 per cent year-to-date against the U.S. dollar, with its NAFTA partner Mexican peso next in line up 2.7 per cent this year.
BMO Capital Markets notes loonie’s strength is surprising, giving the rising uncertainty ahead of the elections taking place today, with most polls pointing to some kind of of a two-way or even three-way coalition.
“While Canada does have plenty of experience with minority governments (including three different versions from 2004 through 2011), a three-party dynamic is new,” said Douglas Porter, BMO’s chief economist. “As well, while there isn’t a huge gap in the overall proposed thrust of fiscal policy, details differ widely, especially when considering some of the proposals of other parties—with potentially big implications for the energy sector at the very least. Suffice it to say, the preternatural calm of the Canadian dollar during the campaign is a surprise.” Here’s what you need to know this morning:
Canada’s 43rd federal election
Corporate Earnings: West Fraser Timber Co Ltd, Bear Creek Mining Corp and Thunderbird Entertainment Group, Amazon.com and Microsoft Inc.
Who was a better steward of the Canadian economy? Stephen Harper adroitly handled the Canadian economy from the world’s worst financial crisis since the Great Depression, while Justin Trudeau has presided at a time when the United States was taken over by one of the most unpredictable and disruptive administrations.
While Trudeau hasn’t been able to beat Harper’s 3.2 per cent GDP growth of 2010, unemployment has fallen dramatically during the Liberals reign. Gross national income per capita surged under Harper but has fallen under Trudeau due to rising population growth.
So, which PM faced greater economic headwinds?
“This is difficult to compare,” says Pedro Antunes, chief economist at Conference Board of Canada. “During the Trudeau years, the U.S. administration’s push to dismantle NAFTA and the recent trade pressures from China have certainly been a challenge for exporters and private investment. Moreover, the economy was challenged by the steep decline in oil prices in 2015.”
Would the Conservative have handled the Canadian economy better in the past four years, given the external forces impacting the economy?
“I would agree that governments can only do so much,” Antunes told the Financial Post in an email. “Trudeau did raise benefits to households and government spending has expanded. This stimulated domestic demand but export growth has been muted. Still, employment growth is doing well, the unemployment rate has dropped to record lows and service sectors are posting solid gains.”
Both Harper and Trudeau failed to focus on tax reform during their terms, which is an important issue for Canada as we’re no longer competitive in comparison to the U.S. “and this has been problematic for private investment,” Antunes concludes.