Budget’s focus on exports demonstrates little ambition
Targets outlined in plan ‘weak’ metric, expert says
OTTAWA— There’s something peculiar with a key performance goal in Prime Minister Justin Trudeau’s last budget.
In a fiscal plan released Wednesday by Finance Minister Bill Morneau, the governing Liberals outlined a new growth strategy focused on skills training and innovation, and set out “clear and ambitious targets” to gauge the success of the program. One goal is to boost exports of goods and services 30 per cent by 2025.
As stated in the budget, the plan is to make the country a “leading centre of global innovation,” with “a strong emphasis on exports because of the connection between trade, and good, well-paying jobs.” A little arithmetic, however, shows that, at least for this measure, there seems to be very little ambition at all.
Long-term projections of GDP from the finance department, which can also be deduced from budget figures, suggest Canada’s economy is poised to grow about 40 per cent by 2025 — almost a third faster than Trudeau’s export growth metric.
In other words, the target Trudeau has chosen to gauge the success of his growth plan is one that is likely to lag behind the rest of the economy. “It is a weak performance metric,” said Kevin Page, a former parliamentary budget officer who now heads the University of Ottawa’s Institute of Fiscal Studies and Democracy.
Using the government’s own targets, the export sector is forecast to shrink, not grow, in relative terms — to about 29 per cent of GDP in 2025, from about 31per cent today, according to Bloomberg calculations.
So, what does the budget actually reveal about how the Liberals plan to drive growth over the next eight years, if not through exports?
While it’s tempting to conclude public spending will be a key driver, given the run of deficits, it’s not seen as a long-term contributor of growth.
Program expenses as a share of GDP are peaking this year at 14.5 per cent, before declining to 13.8 per cent in 2021, budget figures show. The deficit is projected to almost halve over that time, dropping to 0.8 per cent of GDP from 1.4 per cent in 2017.
Household consumption as a share of the economy has been hovering at the highest since possibly as far back as the 1960s, and with debt levels at records, it’s also an unlikely driver of economic growth.
Investment, on the other hand, is mentioned 360 times. To be sure, the budget uses the word as a euphemism for government spending. But the fiscal plan is indeed filled with mentions of attracting business and leveraging the private sector.
The one thing the budget does highlight is just how much Canada — like most developed countries — has entered into a low-growth world, hobbled by an aging labour force and falling productivity. Trudeau is trying to address those challenges head on, with a fiscal plan that focuses on increasing labour force participation rates and innovation.
Canada is in the midst of one of its weakest-ever stretches of growth, so there’s some urgency to the search for alternative models. Trudeau’s vision includes building an army of educated white-collar workers, drawn from all over the globe, closely connected to the country’s worldclass universities, producing exportable services in high-tech industries.