Dial back the verbal sunshine and get real about economy
If there’s a possible silver lining to the horrific start to 2016, it’s this: Canadians may finally awaken to the depth of the economic mess we’re in, and start to get real about what’s needed.
That includes Prime Minister Justin Trudeau and his cabinet, who have appeared overwhelmed.
While Finance Minister Bill Morneau stubbornly professed his “optimism” about the state of the economy just a few days ago, the Bank of Canada was busy ratcheting up the anxiety index, noting that hiring and investment plans as well as consumer confidence are all tanking.
No wonder investors are fleeing Canada’s battered stock market. Toronto’s lead equity index keeps falling, pushing it deeper into bear market terrain, while all three major U.S. equity indexes slid into “correction” territory.
The loonie also tumbled anew. It now sits at a 13-year low, and some analysts say it could be headed to 60 cents.
For his part, Bank of Canada Governor Stephen Poloz seems somewhat less sunny than Morneau or his young boss. He calls the ongoing commodity bust, which has hit Alberta’s economy hardest, a “seismic shift” that could suck up to $50 billion a year from the nation’s economy.
To put that in perspective, that’s five times the size of the supposedly bold $10-billion annual deficit cap the Liberals campaigned on — a cap that was abruptly ditched, post-election, with much higher deficits undoubtedly looming.
Although Morneau is starting to dial back the verbal sunshine as he begins a pre-budget consultation tour, the Liberals are all but mute on the devastation in Alberta’s oilpatch and the glaring need for new oil export pipelines, which the B.C. government seems determined to block.
In Alberta, the gloom is only deepening. But it’s only now that the rest of the country is starting to share our pain, as it wakes up to the grim realization that Canada’s economy is broken in a fundamental way.
For years, Canada’s economy coasted along on one or two cylinders, driven mainly by Alberta’s booming oilpatch and the country’s healthy housing market. Now that oil prices have tanked and housing looks wobbly — outside of bubble markets like Vancouver, which trades on its good looks, a sea of foreign cash and (let’s be honest) a dollop or two of illicit drug money — the outlook is dicey at best.
Canada’s once-vaunted mining sector is flat on its back, spewing red ink. Few major players are left. Shares of Vancouver’s Teck Resources, which in 2011 traded north of $60, are now worth less than $4 apiece.
Canada’s Venture Exchange, the breeding ground for the wannabe resource giants of tomorrow, is down almost 80 per cent since 2011, and hundreds of junior companies are in danger of disappearing.
Bombardier, the perennially struggling anchor of Canada’s aerospace industry, is busy squeezing its new best friends in the Trudeau government for yet another bailout, as its shares flirt with penny stock status.
Ontario’s auto sector is a shell of its former self. It once cranked out more vehicles than any other jurisdiction in North America. But most of the investment dollars these days are going to Mexico or the southern U.S. We need to step up our game and boost productivity, or we’re dead.
Not so long ago, federal NDP Leader Thomas Mulcair insisted the then-lofty loonie (and by implication, high oil prices) were to blame for Ontario’s manufacturing woes. Now that the loonie has plunged, that excuse looks pretty lame.
So where to from here? First, Canada needs to embrace its heritage as a resource exporter, and stop apologizing for it, especially to the eco zealots who are ideologically opposed to development of all kinds.
Does that mean ditching efforts to curb carbon emissions or reduce the environmental impact of resource projects? Of course not. It’s 2016, after all. But now that Alberta has done its bit, it’s time for other provinces — and the feds — to support new pipelines, once they have passed the regulatory approval process.
Canada’s innovation agenda is also a joke. We spend billions on research but haven’t figured out how to commercialize new products. It’s time we did, because the rest of the world is eating our lunch.
Mr. Trudeau, over to you.