Canada in 2011: economy and finance

Bright outlook for Canada’s economy
Canadian and U.S. economies to improve in 2012
(RCI) A leading Canadian economist is predicting that Canada and the United States will both see economic growth in 2012.
Douglas Porter, deputy chief economist with BMO capital markets, says this growth will come despite a recession in Europe.
28 September
Gordon Gibson: We must be a ‘first mover’ on pipelines and terminals
We need enforceable timelines on environmental reviews. Some environmentalists vaunt the so-called “precautionary principle.” Their interpretation is that if we don’t know everything, we shouldn’t do anything. That doesn’t make sense. The world is about risk analysis and management, otherwise stay in bed all day. … Governments simply have to get serious about engaging on this problem. Their irresponsible attitude to date of offloading the resolution of native issues onto project proponents is just not good enough. Only the Crown can deal with that. We badly need native co-operation now, if only for crass economic reasons. It is time to be seeking a grand (and generous) bargain.
26 September
Michel Kelly-Gagnon: Want to Slash Red Tape? Invent a Government Organization! (No, Really.)
(HuffPost Canada) … while reducing excessive regulation is good, keeping it from proliferating in the first place is even better. With this in mind, since new rules and new forms are constantly being created, a government organization that is just as permanent should be set up in order to provide a counterweight to this phenomenon. And it would be beneficial for the most flagrant cases to be divulged publicly at regular intervals in order to encourage bureaucrats and legislators to behave responsibly. To ensure its independence, this organization could come under the Office of the Auditor General and function according to the same basic operational principal, which is to say public denunciation, also known as “name-and shame.”
19 August
In their own words: Flaherty and Carney on stimulus, debt and potential recession
(Globe&Mail) In back-to-back appearances, Finance Minister Jim Flaherty and Bank of Canada Governor Mark Carney offered their assessments of what slowing economic growth in Europe and the United States will mean for Canada. Here are five main points from the testimony…. Flaherty confident deficit-fighting plan can weather economic storm BUT the Star headlines Flaherty, Carney brace for lower economic growth
15 August
Andrew Coyne: The $25,000 cow
That’s the average value of a milk quota per cow under a supply-management system
(Maclean’s) allow me to introduce you to the world of supply management: an actual policy pursued by the governments of Canada and the provinces for the past 40 years. Only I’m not talking about comparative fripperies like magazines (we have our own indefensible support programs, though not, ahem, on the same scale). I’m talking about basic foodstuffs, the kind the typical Canadian family eats every day: dairy products (milk, cheese and butter), eggs, and poultry (chicken and turkey), whose prices are maintained, by means of a strict regime of production quotas, at two and three times their market levels.
If it were proposed today to tax food—even at five per cent, never mind such punitive rates as these—it would be instant political suicide: consider the ruckus that erupts whenever some stray academic suggests the GST should apply to groceries. But because it is the status quo, and because the tax is implicit rather than explicit, and because “it’s to help farmers,” the policy is not only tolerated, it is impossible to remove. Or at least, it has been until now.
8 August
Hundreds in queue to give ideas on how Ottawa should spend, cut billions
Hundreds of individuals, associations and business groups are lining up to advise on next year’s spring federal budget.
And for the first time, they’re being solicited for suggestions on how the federal government can save money — not just spend it.
An invitation issued in late June to appear before the House of Commons finance committee yielded 325 requests by last week. The final date to file written submissions is Friday, Aug. 12.
Conservative MP and finance committee chairman James Rajotte said it’s important for the panel to hear a spectrum of ideas as the government moves from stimulus spending to deficit-slaying mode.
7 August
Bruce Anderson: Drop in global equities markets raises stakes in Canadian politics
(Globe & Mail) Since May, minorities-and-elections fatigue meant most Canadians were happy to ignore national politics, but as we head into the fall, interest will rise once again, and the economy is bound to be the focus.
… Bob Rae stepped into the debate on Friday with a well-timed message that did not rail against reducing the deficit, but made acase for investing in infrastructure and avoiding job cuts. His reasoning will strike many centrist voters as worth a listen: Canada’s fiscal situation should be improved but is not a crisis. Meaning we can and should avoid radical cuts that would put our economy at risk, especially when the US economy is so fragile.
… economic conditions and confidence over the coming weeks will mean the stakes for all parties are going up. Mr. Harper and Mr. Flaherty are seasoned and politically astute: they are unlikely to make grave errors. But stiff economic headwinds, if they occur, always create some desire for change. [For] The Liberals, who need to be understood once again as a party with strong economic credentials, the opportunity to create new interest is unmistakable. For the NDP, the speedy return to health of Jack Layton, a hope shared by a great many people, will not change the fact that the dilemma of how best to position that party, (in a world where China excoriates the U.S. for engorged entitlement programs and a lack of money-sense), may be the toughest assignment of all.
29 July
Jeffrey Simpson: America’s fiscal mess offers long-term opportunities for Canada
Look past the budget negotiations in Washington. Whether or not politicians cobble together a deal before Tuesday’s debt-ceiling deadline, the long-term U.S. fiscal situation will remain grim. How should Canada respond? … If Canada were smart, it would realize it needs to invest in the things that will make the country more competitive, while we bring down budget deficits by spending less on things that don’t.
So an extra dollar spent on education and research will be a dollar well spent, in comparative and competitive terms, provided the teachers and professors don’t grab most of the new spending. An extra dollar spent, say, on even more health care will do nothing for Canada comparatively or competitively.
Invest in the future, while the Americans de-invest.
6 June
Flaherty sticks to deficit pledge, but adds no details
Finance Minister Jim Flaherty warned that government programs will be cut in order to balance the books by 2014-2015, as he tabled a revised budget Monday.
The updated budget includes all of the measures contained in the one tabled in March, plus the two additions Flaherty identified earlier: $2.2 billion for an HST compensation deal for Quebec and a commitment to phase out the per-vote subsidy for political parties.
Written into this budget, however, is the campaign promise made by the Tories to eliminate the federal deficit a year ahead of schedule. The March budget had forecast a deficit of $300 million in 2014-2015 and a surplus in 2015-2016.
Now, the Conservatives are promising the deficit will be history by 2014-2015, once Flaherty books the savings from a government-wide operating review that will serve as the basis for the new target.
Banks, pension funds offer to buy TMX Group
A group of nine Canadian banks and pension funds have offered to buy the TMX Group Inc., attempting to break up a planned merger between TMX and London Stock Exchange Plc with a richer offer that values the owner of the Toronto Stock Exchange at $3.6-billion.
16 May
High inflation won’t last: Bank of Canada
Three-per-cent levels higher than forecast; Carney in no hurry to raise interest rates
11 May
Tories back off campaign pledge to show a surplus by 2014-15
(Globe & Mail) The revised 2011 budget that the government will present next month will not show a surplus by 2014-15 as promised in black and white in the Conservative campaign platform, even though the government insists it still intends to deliver on the election promise.
16 April
Diane Francis: Canada’s case of ‘Dutch Disease’
(Financial Post) … Canada is weak and vulnerable because it has an advanced case of the “Dutch Disease.” This is an affliction caused by a booming resource sector which drives up the currency’s value, which in turn drives out exporters, manufacturing and tourism.
Canada’s looming predicament is well described in a report by The Macro Research Board (MRB), an independent investment consulting firm [of which Wednesday Night’s OWN Peter Perkins is a partner]. Located in London and Montreal, the report is headlined O Canada (Part I) and Uh-Oh Canada (Part II). This study, and its conclusions, should be required reading for every politician and executive in Canada.
30 March
Not exactly an economic gold medal
Among the more than 30 industrial countries that make up the Organization for Economic Co-operation and Development, Canada’s performance has been middling at best. In real GDP growth, Canada tied for 10th in 2009, falling to 13th in 2010. As for the unemployment rate, Canada ranked a gloomy 21st in 2009, tying for 18th by 2010.
Since OECD countries account for a declining share of total world output, let’s consider a truly global sample. The International Monetary Fund reports annual real GDP growth rates for 107 countries, and quarterly data for about half of those. In 2009, Canada ranked 61st of 107. Over the first three-quarters of 2010 (year-end figures aren’t ready yet), we ranked 25th out of 53 countries reporting.
25 March
Terence Corcoran: There is no Harper Nation
(Financial Post) After five-plus years in office, the Harper Conservatives have singularly failed to change the Canadian ideological landscape. Instead, Canadian politics changed the Conservatives. In power, they transformed themselves into another basely partisan party that willingly and even eagerly pandered to whatever the political three-ring circus put on display. This week’s budget, in which $2-billion in loose cash was promptly distributed to a score of special interests and political agendas, left in place a $40-billion deficit for 2010 and solidified a $100-billion increase in the national debt over five years.
A more meaningful indicator of the failure to establish a Harper Nation is the trend in government spending across all levels of government — the national spending culture. The table above shows how the culture of expansionist Big Government returned to Canadian politics within a year of the 1996 fiscal crisis and continued dramatically through the last five years of Harper conservatism. From $13,400 in 1997, the spending of federal, provincial and local governments per capita jumped to $18,000 last year, an increase of more than 33%
Note that these are not a parade of dollars bloated by inflation. These are constant dollars after inflation has been removed, which means that governments in Canada are spending $4,500 more for each person today than in 1997, or about $18,000 for a family of four. Total all-government spending today for a family of four exceeds $72,000 a year.
23 March
The CMHC: Canada’s mortgage monster
The CMHC is a driving force in the housing market. But critics warn its policies could fuel a U.S.-style meltdown.
(Maclean’s) “The Canadian government mortgage apparatus echoes uncannily our experiences down here with Fannie and Freddie” says Jim Grant, author of the widely read Grant’s Interest Rate Observer newsletter. “CMHC has distorted the housing market by making homes, especially ones that are on the pricier end of the spectrum, more affordable and encouraged a lot of people to get in over their heads.”
What bothers Grant is that the CMHC’s government-backed guarantees encourage banks to feel they have less to lose if loans go bad. “The risk has been shifted, rather than reduced, from the stockholders and depositors of the big Canadian banks to the Canadian taxpayer,” he says. And if house prices fall and borrowers get into trouble, the ripples would run far and wide. “A sharp break in Canadian house prices would inflict terrific damage to consumer confidence, would hurt the Canadian labour market, and ultimately produce a lot of the unpleasant results that have been America’s burden to bear since 2007.”
9 March
The banks’ opposition to TMX and the Alpha factor
Watching some of the country’s biggest financial institutions line up to oppose the TMX Group Inc.’s (X-T38.88-1.00-2.51%) plan to combine with London Stock Exchange Group Inc., the understandable question comes up, how much of this has to do with sincere concern about the fate of the country’s capital markets and how much is self-interest?
That question is particularly acute given that the four banks that appear to be leading the push against TMX are all shareholders of Alpha Group, the competitor to TMX’s Toronto Stock Exchange that has shaken up the trading world.
8 March
Alberta court finds Ottawa’s bid for national [securities] regulator unconstitutional
Area long considered provincial jurisdiction, appeal court rules
TMX-LSE deal approval should come with strict conditions: Prentice
22 February
‘Superstar’ status in global economic poll strengthens Harper’s hand
A new international survey shows Canadians are in a very positive mood about the state of the economy, suggesting the opposition parties face an uphill battle pushing for change on the eve of a possible federal election.
Describing Canada as a “superstar,” an Ipsos online survey of citizens in 24 countries finds 68 per cent of Canadians are feeling good about the economy.
Tories won’t ‘engage in horse trading’ over budget, Harper says
Prime Minister Stephen Harper signalled limited flexibility in his negotiations with the NDP for their support for the next budget and avoid an election.
15 February
FACTBOX-Canadian regulatory approvals needed by TMX-LSE deal
(Reuters) – The London Stock Exchange’s (LSE.L) bid to take over Canada’s TMX Group (X.TO) will require a nod from federal and provincial regulators.
Not including regulatory issues in the United States and Britain, the following are the federal and provincial processes facing the transaction in Canada: Read on, it’s a LONG list
‘Lukewarm’ reception for merger
Proposed TSX-LSE deal criticized. Ontario expresses major concerns as Dubai responds half-heartedly
(Montreal Gazette) While Ontario’s finance minister has raised concern about a large Dubaibased sovereign wealth fund becoming the biggest shareholder of the Toronto Stock Exchange, the Dubai stock exchange appears not too keen on the deal either [although from their perspective UAE-Canada relations at all-time low, there might be some poetic justice in it]
… The landmark merger, intended to create one of the largest listings exchange in the world with commanding positions in natural resources, clean energy and derivatives, instantly drew criticism in Canada.
(Globe &Mail) Will politics trump economics again on TMX-LSE file?
14 February
Canada to review TMX merger
Industry Minister Tony Clement said Monday the federal government would review the merger between the London Stock Exchange and TMX Group Inc., but indicated the provinces would have a say over whether the deal was “viable.”
LSE-TMX executives had suggested to shareholders the deal – which would see the Toronto and Montreal stock exchanges fall under foreign control — would be subject to a federal review. Under the terms of the federal Investment Canada Act, foreign investments of over US$299-million are subject to a federal review to ensure they are of so-called “net benefit” to the country.
“Where a transaction is subject to review, the investor must obtain my approval before implementing the investment,” he told reporters on Parliament Hill. “I only approve an application where an investment demonstrates it will be a net benefit to Canada.”
But the official announcement by Mr. Clement comes as the Ontario Liberal government continues to raise concerns about the deal. Dwight Duncan, the Ontario Finance Minister, said he considered the TSX to be a “strategic asset,” and had reservations that a Dubai-based sovereign wealth fund would be the biggest shareholder of a LSE-TMX merger.
Decision on TMX-LSE merger review is imminent, Tony Clement says (Given all the regulatory hoops – maybe not that imminent)
10 February
Tories, Liberals apathetic toward corporate responsibility: rights watchdog
The Conservatives and Liberals are united in their apathy toward any government-imposed corporate social accountability, a human-rights watchdog says.
The New York-based agency, Human Rights Watch, reached that conclusion after it canvassed the two federal parties in Ottawa this week following the release of its report about sexual-assault allegations at a Canadian-run gold mine in Papua New Guinea. This is an old story according to IPS Gov’t Urged to Rein in Mining Sector (December 5, 2007)
LSE hails TMX deal but Canadians remain wary
Shares in the London Stock Exchange soared yesterday after it confirmed plans to merge with TMX Group, which owns the Toronto stock exchange.
The LSE finished up 28p at 920p, despite warnings from Canadian politicians that they would examine the deal to see if the Investment in Canada Act applies. The law was used to scupper the miner BHP Billiton’s hostile bid for the fertiliser maker PotashCorp last year.
It’s worth noting that the Economist takes a rather dim view of exchange mergers: The reality is that the exchange business is unusually unglobal. Securities and derivatives are traded, by and large, in long-standing silos, with their own regulations, laws, working hours and critical mass of big, savvy market participants, who may not all be based in the same country but who share the same rules of engagement. Even if practical, the utility of being able to trade everything, everywhere, all the time is not clear. Read article
31 January
Federal cabinet ministers hold consultations on the economy with hard-working Canadians (what about those they deem to not be hard working? How do they decide which is which?)
25 January
Ministers to bang drum for Canada in Davos
(Globe & Mail) The high-powered delegation includes at least three ministers – Finance Minister Jim Flaherty, Trade Minister Peter Van Loan and Industry Minister Tony Clement – plus Bank of Canada Governor Mark Carney.
The ministers are also hosting a special “Invest in Canada” reception for delegates to tout Canada as a good place to put money in a turbulent global economy. Canada has held a similar event at previous Davos gatherings. But this one comes at a time when protectionism is on the rise and economic uncertainty abounds.
20 January
Productivity great worry for Carney
Canada’s lacklustre competitiveness is catching up with us in a big way, suggests Bank of Canada governor Mark Carney.
He has an excellent point, although some private-sector forecasters believe his pessimism could be overdone.
17 January
Flaherty tightens mortgage taps
(CBC) Federal Finance Minister Jim Flaherty announced tighter mortgage rules on Monday to address concerns over high Canadian household debt.
4 January
The rich get richer
(Ottawa Citizen) Canada’s top CEOs made the annual salary of an average worker by 2:30 p.m. Monday, reports John Morrissy.
Canada’s best-paid chief executives earned 155 times the average income earner during the darkest days of the recession, the Canadian Centre for Policy Alternatives said in a report Monday