Sagging economy ruins Tory plan
It must be galling for the prime minister that every time he tries to pump some sunshine up the collective posterior of the electorate, the governor of the Bank of Canada shows up and ruins things.
Stephen Harper has been holding campaign-style events across the country, touting the government’s stellar economic record and claiming the other guys would send us back to the dark days of the great recession.
“People should be confident about the future,” he said.
But then along comes Stephen Poloz, pointing out that things are not nearly as rosy as the prime minister would have people believe — and that if it had not been for him, things would be even worse.
Poloz was on a panel at the Bank of International Settlements in Switzerland on Sun- day, when he said his “very controversial” quarter-point interest rate cut in January had acted like life-saving surgery on an ailing Canadian economy after the oil-price collapse.
“If the doctor says you need surgery to avoid death, the side effects usually don’t deter you, you just go ahead and manage through somehow,” he said in defence of his decision to loosen monetary policy at a time when consumer-debt-to-income ratios are at record highs.
The bigger problem for the prime minister than the governor trotting around the globe using words like “atrocious” to describe the Canadian economy, is that Poloz is closer to the mark than he is.
The GDP numbers for April came out Tuesday and show the economy contracted 0.1 per cent. That follows the three previous months of negative growth. With the second quarter just about to end, it is entirely possible that Canada is back in recession (defined as two straight quarters of economic contraction), for the first time since April 2009.
For a Conservative party whose only prayer of re-election is to deliver on its pledge of jobs and growth, this must be prompting some duodenal percolation.
The Tories did get some unexpected good news in May, with a big gain in jobs. The government is still projecting growth of 1.9 per cent this year, and even the Bank of Canada expects a rebound in the second half of the year, based on a weak Canadian dollar, firmer oil prices and a growing U.S. economy.
But the Conservatives might still enter an election campaign against the backdrop of an economy in recession.
The unemployment rate remains at a stubborn 6.8 per cent, and other indicators, from retail to manufacturing sales, are weak. Exports, the supposed saviour of the economy, have declined for seven months in a row.
Harper’s message has been tweaked accordingly — with more emphasis on lower taxes for families and keeping Canadians safe in an uncertain world. He is convinced these are the issues Canadians care about, and he is likely correct. But it’s no good identifying the issues if you don’t deliver on them.
One Conservative candidate said the government is not getting credit on the doorstep for its family tax cut plan, “which is mind-blowing, given the policies and programs we have introduced.” Justin Trudeau has outbid the Tories on family tax breaks, a situation the latter cannot allow to stand, if they are to lure blue Liberals back into their columns to stave off an NDP government.
It all suggests jitters about the economy among voters, reflected in a leap in the number of Canadians who polls say think we should have a change of government in Ottawa.
The Harper Conservatives have made a virtue of being a one-trick pony — convincing voters that they alone can manage the economy. But what to do when the trick no longer impresses?