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Business

Canada’s productivity and prosperity slump

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7 minute read

From Resource Works

“The U.S. is on track to produce nearly 50 percent more per person than Canada will. This stunning divergence is unprecedented in modern history.”

National productivity is key to our personal prosperity and standard of living—and we’re in trouble.

Canada’s productivity, a measure of our efficiency in producing goods and services, has been seriously slumping for years, and we are now one of the least productive G7 nations.

Now, business leaders say part of the solution could, and should, lie in producing natural resources and supercharging the resource sector.

The Royal Bank of Canada reports: “The Canadian economy has continued to underperform global peers. Declines in per-capita output in seven of the last eight quarters have left average income per person back at decade-ago levels, and the unemployment rate has risen more than in other advanced economies.

“Canada is not ‘officially’ in a recession… but per-capita gross domestic product and the unemployment rate are more representative of what individual households and workers are experiencing in the current economy, and on that basis, it certainly feels like one.”

Now, a new report by the Canadian Chamber of Commerce says a comprehensive national strategy is needed to promote resource investments.

“We really need to lean into our strengths as a country,” says report author Andrew DiCapua. “We are lucky to live in a country where we have abundant natural resources… We should be trying to find ways to attract investment to supercharge the sector.”

Senior economist DiCapua notes: “With Canada facing significant economic challenges—below-trend growth, declining living standards, regulatory uncertainty, and weak business investment—the Canadian economy is not keeping pace.

“The main recommendation here is to create regulations and policies that provide regulatory certainty—or rather clarity—so that investment can be attracted into this crucial (natural-resource) sector.”

The national business group says the new approach should include streamlining government regulations, recognizing the need for timely approval of major projects, and ensuring policy stability.

It also recommends speeding up the delivery of investment tax credits for projects that cut emissions and adopting a trade infrastructure plan to ensure the country has sufficient roads, ports, and energy transmission lines for accessing resources in remote areas.

The Chamber notes that the natural-resources sector is the second-largest in Canada, paying compensation last year that was $25,000 more than the national average.

“The sector can do this because of its productivity prowess, which is closely linked to the country’s prosperity and long-term standard of living. This is why increasing investment in high-productivity sectors, particularly within natural resources, is an obvious remedy to our productivity challenges.”

And it adds: “Given the natural resources sector’s higher-than-average Indigenous workforce participation, higher wage opportunities can help increase Indigenous employment and economic participation, furthering economic reconciliation efforts by supporting Indigenous-owned businesses, equity partnerships, and employment.”

Economists, business leaders, and the Bank of Canada have highlighted the country’s productivity woes for years—and the level of concern is growing.

As TD Economics pointed out in a worrisome report: “Canadians’ standard of living, as measured by real GDP per person, was lower in 2023 than in 2014.

“Without improved productivity growth, workers will face stagnating wages, and government revenues will not keep pace with spending commitments, requiring higher taxes or reduced public services.”

And: “Over the decade prior to the pandemic, business sector productivity grew at a respectable rate of 1.2% annually. Since 2019, it has ceased to expand at all, setting Canada apart as one of the worst-performing advanced economies, not to mention in stark contrast to the United States…

“The woes are widespread. Relative to growth in the decade prior to the pandemic, only a few service industries have managed to improve their performance… To get the same output, it now requires more hours from workers. Hard to believe this could occur in a digital age.”

Economist Trevor Tombe of the University of Calgary states: “The gap between the Canadian and American economies has now reached its widest point in nearly a century.

“If this continues, we’ll not have persistently seen this wide of a gap since the days of John A. Macdonald… Taking bolder action to address this growing prosperity gap is needed. And fast.

“The U.S. is on track to produce nearly 50 percent more per person than Canada will. This stunning divergence is unprecedented in modern history.”

Earlier this year, Carolyn Rogers, senior deputy governor of the Bank of Canada, gave this warning on our productivity: “You’ve seen those signs that say, ‘In emergency, break glass.’ Well, it’s time to break the glass.”

Rogers said in a Halifax speech: “An economy with low productivity can grow only so quickly before inflation sets in. But an economy with strong productivity can have faster growth, more jobs, and higher wages with less risk of inflation…

“We thought productivity would improve coming out of the pandemic as firms found their footing and workers trained back up. We’ve seen that happen in the US economy, but it hasn’t happened here. In fact, the level of productivity in Canada’s business sector is more or less unchanged from where it was seven years ago.”

It’s beyond time for our federal and provincial governments to get in gear and take steps to help get our productivity back on track.

The Chamber of Commerce’s recommendations would be a good place to start: adopt sensible regulations and stable policies that encourage investment in our natural resources, and speed up the approval of major projects.

Business

It Took Trump To Get Canada Serious About Free Trade With Itself

Published on

From the  Frontier Centre for Public Policy

By Lee Harding

Trump’s protectionism has jolted Canada into finally beginning to tear down interprovincial trade barriers

The threat of Donald Trump’s tariffs and the potential collapse of North American free trade have prompted Canada to look inward. With international trade under pressure, the country is—at last—taking meaningful steps to improve trade within its borders.

Canada’s Constitution gives provinces control over many key economic levers. While Ottawa manages international trade, the provinces regulate licensing, certification and procurement rules. These fragmented regulations have long acted as internal trade barriers, forcing companies and professionals to navigate duplicate approval processes when operating across provincial lines.

These restrictions increase costs, delay projects and limit job opportunities for businesses and workers. For consumers, they mean higher prices and fewer choices. Economists estimate that these barriers hold back up to $200 billion of Canada’s economy annually, roughly eight per cent of the country’s GDP.

Ironically, it wasn’t until after Canada signed the North American Free Trade Agreement that it began to address domestic trade restrictions. In 1994, the first ministers signed the Agreement on Internal Trade (AIT), committing to equal treatment of bidders on provincial and municipal contracts. Subsequent regional agreements, such as Alberta and British Columbia’s Trade, Investment and Labour Mobility Agreement in 2007, and the New West Partnership that followed, expanded cooperation to include broader credential recognition and enforceable dispute resolution.

In 2017, the Canadian Free Trade Agreement (CFTA) replaced the AIT to streamline trade among provinces and territories. While more ambitious in scope, the CFTA’s effectiveness has been limited by a patchwork of exemptions and slow implementation.

Now, however, Trump’s protectionism has reignited momentum to fix the problem. In recent months, provincial and territorial labour market ministers met with their federal counterpart to strengthen the CFTA. Their goal: to remove longstanding barriers and unlock the full potential of Canada’s internal market.

According to a March 5 CFTA press release, five governments have agreed to eliminate 40 exemptions they previously claimed for themselves. A June 1 deadline has been set to produce an action plan for nationwide mutual recognition of professional credentials. Ministers are also working on the mutual recognition of consumer goods, excluding food, so that if a product is approved for sale in one province, it can be sold anywhere in Canada without added red tape.

Ontario Premier Doug Ford has signalled that his province won’t wait for consensus. Ontario is dropping all its CFTA exemptions, allowing medical professionals to begin practising while awaiting registration with provincial regulators.

Ontario has partnered with Nova Scotia and New Brunswick to implement mutual recognition of goods, services and registered workers. These provinces have also enabled direct-to-consumer alcohol sales, letting individuals purchase alcohol directly from producers for personal consumption.

A joint CFTA statement says other provinces intend to follow suit, except Prince Edward Island and Newfoundland and Labrador.

These developments are long overdue. Confederation happened more than 150 years ago, and prohibition ended more than a century ago, yet Canadians still face barriers when trying to buy a bottle of wine from another province or find work across a provincial line.

Perhaps now, Canada will finally become the economic union it was always meant to be. Few would thank Donald Trump, but without his tariffs, this renewed urgency to break down internal trade barriers might never have emerged.

Lee Harding is a research fellow with the Frontier Centre for Public Policy.

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2025 Federal Election

Carney’s budget is worse than Trudeau’s

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By Gage Haubrich

Liberal Leader Mark Carney is planning to borrow more money than former prime minister Justin Trudeau.

That’s an odd plan for a former banker because the federal government is already spending more on debt interest payments than it spends on health-care transfers to the provinces.

Let’s take a deeper look at Carney’s plan.

Carney says that his government would “spend less, invest more.”

At first glance, that might sound better than the previous decade of massive deficits and increasing debt, but does that sound like a real change?

Because if you open a thesaurus, you’ll find that “spend” and “invest” are synonyms, they mean the same thing.

And Carney’s platform shows it. Carney plans to increase government spending by $130 billion. He plans to increase the federal debt by $225 billion over the next four years. That’s about $100 billion more than Trudeau was planning borrow over the same period, according to the most recent Fall Economic Statement.

Carney is planning to waste $5.6 billion more on debt interest charges than Trudeau. Interest charges already cost taxpayers more than $1 billion per week.

The platform claims that Carney will run a budget surplus in 2028, but that’s nonsense. Because once you include the $48 billion of spending in Carney’s “capital” budget, the tiny surplus disappears, and taxpayers are stuck with more debt.

And that’s despite planning to take even more money from Canadians in years ahead. Carney’s platform shows that his carbon tariff, another carbon tax on Canadians, will cost taxpayers $500 million.

The bottom line is that government spending, no matter what pile it is put into, is just government spending. And when the government spends too much, that means it must borrow more money, and taxpayers have to pay the interest payments on that irresponsible borrowing.

Canadians don’t even believe that Carney can follow through on his watered-down plan. A majority of Canadians are skeptical that Carney will balance the operational budget in three years, according to Leger polling.

All Carney’s plan means for Canadians is more borrowing and higher debt. And taxpayers can’t afford anymore debt.

When the Liberals were first elected the debt was $616 billion. It’s projected to reach almost $1.3 trillion by the end of the year, that means the debt has more than doubled in the last decade.

Every single Canadian’s individual share of the federal debt averages about $30,000.

Interest charges on the debt are costing taxpayers $53.7 billion this year. That’s more than the government takes in GST from Canadians. That means every time you go to the grocery store, fill up your car with gas, or buy almost anything else, all that federal sales tax you pay isn’t being used for anything but paying for the government’s poor financial decisions.

Creative accounting is not the solution to get the government’s fiscal house in order. It’s spending cuts. And Carney even says this.

“The federal government has been spending too much,” said Carney. He then went on to acknowledge the huge spending growth of the government over the last decade and the ballooning of the federal bureaucracy. A serious plan to balance the budget and pay down debt includes cutting spending and slashing bureaucracy.

But the Conservatives aren’t off the hook here either. Conservative Leader Pierre Poilievre has said that he will balance the budget “as soon as possible,” but hasn’t told taxpayers when that is.

More debt today means higher taxes tomorrow. That’s because every dollar borrowed by the federal government must be paid back plus interest. Any party that says it wants to make life more affordable also needs a plan to start paying back the debt.

Taxpayers need a government that will commit to balancing the budget for real and start paying back debt, not one that is continuing to pile on debt and waste billions on interest charges.

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