Confidence in Canada's fiscal health is 'eroding,' says business group president
Finance Minister Chrystia Freeland presents her fall economic update on Monday
The president of the Business Council of Canada (BCC) says the business community's confidence in the federal government's picture of Canada's fiscal health is "eroding" and suggests federal finances are "almost being manipulated."
"What I've heard from business leaders across this country is that the math is not adding up and there are consequences to that," Goldy Hyder told CBC's The House just days before the finance minister presents her fall economic update.
"When you have eroding confidence that the finances of this country are literally almost being manipulated to give you a story that's not accurate, that goes a long way in saying to business leaders, 'Don't invest right now,'" he told host Catherine Cullen.
Hyder pointed to Ottawa's changes to capital gains taxes and its speculation about what to do with a surplus in the federal public service pension plan as signs that it's anxious to find new sources of revenue.
"It looks like a government that's looking under the sofa cushions for all the money it can find to pay for its spending habits," Hyder said.
There's been speculation that the federal government will fail to meet the $40.1 billion deficit target Freeland set last year. On Tuesday, the finance minister did not commit to meeting that goal.
Instead, Freeland said she expects the fall economic statement, which will be presented on Monday, to show a declining debt-to-GDP ratio.
Hyder said the business community lacks confidence in the federal government's projections because "today's anchor is something other than [what] it was before."
"What we see here is a government that's not inspiring confidence for investment, a government that's not inspiring confidence in the markets at a time in which the economy is weak," he said.
In late November, Statistics Canada reported the Canadian economy grew at an annualized rate of one per cent in the third quarter, in part due to higher government and household spending.
Armine Yalnizyan, an economist and Atkinson Fellow on the Future of Workers, said the deficit dollar amount matters less than the government's debt-to-GDP ratio.
Yalnizyan also pointed to the interest the federal government has to pay on its debt. Last year, federal debt charges came to 1.3 per cent of GDP — one of the lowest figures since 1966, according to the federal government's fiscal reference tables.
"I know that there are some parties that would like us to have no debt at all," she said. "That is not possible but that can sometimes be the miracle number they are reaching for."
Yalnizyan also said Canadians need to "pick a lane. You either want the services or you want the tax cuts."
Trump's tariff threat looms large
Canadian businesses, provincial governments and the federal government are all bracing for U.S. president-elect Donald Trump to make good on his threat to slap a 25 per cent tariff on all imports from Canada and Mexico.
Yalnizyan said Trump's style has been to "create uncertainty and put people on their back foot" since governments don't know how substantial their response should be, or whether they should respond at all.
"So there's advantages to go around without actually imposing the tariff. There's what people are calling obedience in advance," Yalnizyan said.
Trump has also criticized the United States' trade deficits with Canada and Mexico, describing them as subsidies.
Yalnizyan said the nature of trade means there will never be a complete balance between Canada and the United States.
"Consequently, we're never going to be able to appease him ... unless we are always buying more things from the United States than they're buying from us. And maybe that's the game plan," she said.
Hyder said Trump's tariff threat is a tactic to drive capital investment into the United States. He said Canada needs to "smarten up" and consult with Canadian businesses about how to tackle the problem.
ABOUT THE AUTHOR
