Prime Minister Justin Trudeau’s government must refocus spending on boosting investment instead of consumption to address Canada’s sluggish productivity growth, argues a new report co-written by former Bank of Canada governor David Dodge.
Canada’s gross domestic product per capita has fallen at a 0.5 per cent annualized pace since the start of 2020, compared with a 1.6 per cent annualized increase in the U.S. The country’s productivity has “suffered chronically” since the mid-1990s, according to a report released Monday by law firm Bennett Jones.
“We have to shift from relying excessively on the expansion of the labor force and hours worked to grow the economy,” say the authors, who also include former Liberal cabinet minister John Manley and ex-British Columbia Premier Christy Clark.
The report adds to mounting criticisms Canada’s economy has become too reliant on population growth and government spending, and is persistently short on business investment in productive capital and skill development.
Labour productivity fell 0.8 per cent in the third quarter, according to data released last week by Statistics Canada, the sixth consecutive quarterly decline.
The report also calls Trudeau’s latest budget outlook — which added $20.8 billion in spending over six years — “unsustainable.” The authors say federal spending is still geared toward transfers and services, which “reinforce” consumption at a time when fiscal policy should be directed to boosting expenditures in infrastructure, housing, skills development, research and development and national security.
In the last year, transfers from government represented 19 per cent of Canadian household income, the highest level since 1994 outside the COVID-19 crisis, according to
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