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Business

Business investment key to addressing Canada’s productivity crisis

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4 minute read

From the Fraser Institute

By Tegan Hill

The Bank of Canada’s senior deputy governor Carolyn Rogers recently raised the alarm on Canada’s productivity crisis, saying “it’s an emergency—it’s time to break the glass.” But to address Canada’s productivity problem, which is contributing to our stagnant living standards, we must first address Canada’s weak business investment.

For perspective, Canada’s economic growth in the fourth quarter of 2023, as measured by per-person GDP, a common indicator of living standards, was $58,111, which is slightly less than it was at the end of 2014 at $58,162 (after adjusting for inflation). That means that over roughly the last decade, Canadian living standards have not increased. Indeed, our economic problems span well beyond the pandemic. In the five years prior to 2019 (the last pre-COVID year), Canada’s per-person GDP (inflation-adjusted) was the 4th weakest out of 38 advanced countries.

Unfortunately, prospects for the future are dim. According to the OECD, Canada will record the lowest rate of per-person GDP growth among 32 advanced economies over roughly the next 40 years. Countries such as Estonia, South Korea and New Zealand are expected to pass Canada and achieve higher living standards by 2060.

Given that growth in productivity—essentially, the value of economic output per hour of work—is key to higher living standards, it’s no surprise that Rogers and other analysts are raising alarms. But what’s at the heart of our productivity crisis?

Put simply, weak business investment. While the federal and many provincial governments have prioritized immigration and bigger government in an effort to stimulate productivity growth and grow our economy, they’ve ignored business investment, which has significantly declined in recent years.

From 2014 to 2022, inflation-adjusted total business investment (in plants, machinery, equipment and new technologies but excluding residential construction) in Canada declined by C$34 billion. During the same time period, after adjusting for inflation, business investment per worker declined (on average) by 2.3 per cent annually. In contrast, business investment per worker grew (on average) by 2.8 per cent annually from 2000 to 2014.

While business investment has generally declined in Canada since 2014, in other countries, including the United States, it’s continued to grow. As a result, Canada’s GDP per hour worked—a key measure of productivity growth—is among the lowest in the OECD.

Think of it this way; when businesses invest in physical and intellectual capital they equip workers with the tools and technology (e.g. machinery, computer programs, artificial intelligence) to produce more and provide higher quality goods and services, which fuels innovation and higher productivity. Because Canada has lower levels of investment in tools and technology, our workers are less productive.

But here’s the good news. Governments across Canada can enact policies to help stimulate business investment, productivity gains, and ultimately, stronger economic growth. The key is to reduce onerous regulations, rein in high government spending, and create a pro-growth tax environment that makes Canada a more attractive place for business to locate and invest. These policies have a proven track record of improving business investment in Canada. For its part, the Trudeau government can prioritize pro-growth policies when it tables the federal budget next week.

Clearly, without a change in the investment climate and stronger productivity growth, the economic outlook looks grim. Fortunately, Canadian governments can respond to this emergency with pro-growth policy reform.

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2025 Federal Election

As PM Poilievre would cancel summer holidays for MP’s so Ottawa can finally get back to work

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From Conservative Party Communications

In the first 100 days, a new Conservative government will pass 3 laws:

1. Affordability For a Change Act—cutting spending, income tax, sales tax off homes

2. Safety For a Change Act to lock up criminals

3. Bring Home Jobs Act—that repeals C-69, sets up 6 month permit turnarounds for new projects

No summer holiday til they pass!

Conservative Leader Pierre Poilievre announced today that as Prime Minister he will cancel the summer holiday for Ottawa politicians and introduce three pieces of legislation to make life affordable, stop crime, and unleash our economy to bring back powerful paycheques. Because change can’t wait.

A new Conservative government will kickstart the plan to undo the damage of the Lost Liberal Decade and restore the promise of Canada with a comprehensive legislative agenda to reverse the worst Trudeau laws and cut the cost of living, crack down on crime, and unleash the Canadian economy with ‘100 Days of Change.’ Parliament will not rise until all three bills are law and Canadians get the change they voted for.

“After three Liberal terms, Canadians want change now,” said Poilievre. “My plan for ‘100 Days of Change’ will deliver that change. A new Conservative government will immediately get to work, and we will not stop until we have delivered lower costs, safer streets, and bigger paycheques.”

The ’100 Days of Change’ will include three pieces of legislation:

The Affordability–For a Change Act 

Will lower food prices, build more homes, and bring back affordability for Canadians by:

We will also:

  • Identify 15% of federal buildings and lands to sell for housing in Canadian cities.

The Safe Streets–For a Change Act 

Will end the Liberal violent crime wave by:

The Bring Home Jobs–For a Change Act 

This Act will be rocket fuel for our economy. We will unleash Canada’s vast resource wealth, bring back investment, and create powerful paycheques for workers so we can stand on our own feet and stand up to Trump from a position of strength, by:

Poilievre will also:

  • Call President Trump to end the damaging and unjustified tariffs and accelerate negotiations to replace CUSMA with a new deal on trade and security. We need certainty—not chaos, but Conservatives will never compromise on our sovereignty and security. 
  • Get Phase 2 of LNG Canada built to double the project’s natural gas production.
  • Accelerate at least nine other projects currently snarled in Liberal red tape to get workers working and Canada building again.

“After the Lost Liberal Decade of rising costs and crime and a falling economy under America’s thumb, we cannot afford a fourth Liberal term,” said Poilievre. “We need real change, and that is what Conservatives will bring in the first 100 days of a new government. A new Conservative government will get to work on Day 1 and we won’t stop until we have delivered the change we promised, the change Canadians deserve, the change Canadians voted for.”

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Automotive

Canadians’ Interest in Buying an EV Falls for Third Year in a Row

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From Energy Now

Electric vehicle prices fell 7.8 per cent in the last quarter of 2024 year-over-year, according to the AutoTader price index

Fewer Canadians are considering buying an electric vehicle, marking the third year in a row interest has dropped despite lower EV prices, a survey from AutoTrader shows.

Forty-two per cent of survey respondents say they’re considering an EV as their next vehicle, down from 46 per cent last year. In 2022, 68 per cent said they would consider buying an EV.

Meanwhile, 29 per cent of respondents say they would exclusively consider buying an EV — a significant drop from 40 per cent last year.

The report, which surveyed 1,801 people on the AutoTrader website, shows drivers are concerned about reduced government incentives, a lack of infrastructure and long-term costs despite falling prices.

Electric vehicle prices fell 7.8 per cent in the last quarter of 2024 year-over-year, according to the AutoTader price index.

The survey, conducted between Feb. 13 and March 12, shows 68 per cent of non-EV owners say government incentives could influence their decision, while a little over half say incentives increase their confidence in buying an EV.

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