A Rose by Any Other Name
Following 40 plus years of Progressive Conservative governments in Alberta, and the election of the Rachel Notley led NDP in 2015, the appropriate (and summarized) quote from Jimmy Dean aptly described the situation. In that energy dependent province, although they might be able to “adjust [the] sails… [they] can’t change the direction of the wind.” That very useful quote could be used and applied several ways to discuss the outcome of the most recent federal election. I’ll attempt one way.
In a campaign that left too much to the imagination in terms of a focus on the Canadian economy, we’re left in a political environment that will seem somewhat like the previous four years. Although the immediate headline reaction seemed more focused on the fragility of a federal minority government than history might suggest, Trudeau’s opportunity in dealing with a depleted federal
NDP or a reinvigorated Blocquebecois content with their seat count may prove more stable than what the election night reaction might have been.
Unfortunately, what has not wavered are the global forces impacting the Canadian economy from the trend of deglobalization to heightened levels of geopolitical uncertainty, which have led to trade flows to business investment being disrupted and decisions being postponed.
In a concerted effort, the world’s central banks, with the exception of the Bank of Canada, have collectively cut interest rates and adjusted to more accommodative monetary policy to tackle this global growth slowdown. Ultimately, the Bank of Canada will likely follow suit the beginning of next year as the Canadian dollar being the best performing G10 currency through 2019 comes at the cost of economic competitiveness and productivity advances.
Still, as we re-embark on a period of accommodative monetary policy, the debate seems to have shifted from the merits of ultra-low interest rates to the efficacy of the policy, and especially 10-plus-years postcrisis, what the medium and now long-term consequences may be.
The global economy is challenged by policy induced frictions in addition to scenarios where corporate and consumer debts could both pose challenges to growth, hence the elevated talk of risks of a looming recession.
With the few weeks left of 2019 and into January 2020, the financial media will entertain analyst and economist forecasts for the year ahead as they outline risks and opportunities for the global economy. We can also add in the mix the forecasts for the new Liberal government and their fiscal stimulus plans as a new government. Ultimately, and perhaps unfortunately, what seems likely is another year of muted growth with headwinds from geopolitical uncertainties as the impact of more accommodative monetary policy wanes and the ongoing propensity to deficit spend may yield little in the way of positive results.