Regional fault lines emerge as the federal election race comes to a close
Canada’s economic landscape is poised to see some minor changes after Monday’s election, regardless of whether Justin Trudeau’s Liberals or Andrew Scheer’s Conservatives take power, though the big picture drivers and challenges to growth will largely remain unchanged.
Here’s what will, and won’t, likely change after the vote.
Over the next couple of years, Canada is in store for more federal stimulus, regardless of the winner. This is due to the Liberal government’s already budgeted spending increases which the parliamentary budget office projects will increase the deficit to $21 billion this year and $23 billion in 2020, from $14 billion in 2018.
The Liberals are actually promising to add to that spending, and anticipate their deficits will jump to about $27 billion next year, exceeding one per cent of gross domestic product for the first time since 2012. The Conservatives meanwhile will adhere to the current deficit projection through 2020.
Beyond 2020, a key policy divide emerges on closing the budget gap. Trudeau plans to run deficits of more than $20 billion every year during a second mandate, increasing the projected debt by $32 billion over that time.
The Conservatives argue this is an irresponsible approach, because it would cause future generations to pay for the increased public debt through higher taxes. They vow instead to close the budget gap within five years by cutting foreign aid and corporate handouts, as well as by expanding the time horizon for planned infrastructure spending, which would reduce the annual amount spent on large projects.
Most individual Canadians will pay lower taxes, while corporations will pay a bit more. The most expensive campaign pledges for both parties are personal income tax cuts. The Liberals are pledging to raise the threshold under which no taxes are paid. The Conservatives plan to lower the rate of the lowest tax bracket. The cost for both is about $6 billion annually by 2023.
While this is the main tax pledge for the Liberals, whose platform is more spend-heavy, the Conservatives are also planning a series of other tax cuts for households that will bring the total cost of their tax reductions to about $10 billion annually.
Both parties, however, are planning to finance some of their measures by tapping corporate coffers. The Liberals plan to close corporate tax loopholes, while the Conservatives have pledged to cut corporate welfare — much of which comes in the form of tax credits. Both parties want to tax tech giants. These additional costs to corporations are marginal, and pale in comparisons to the higher corporate tax proposals made by the smaller left-leaning parties.
The Conservatives have pledged to eliminate the carbon tax introduced by Trudeau’s government earlier this year on holdout provinces with no carbon pricing. The Liberals plan to raise the minimum price provinces need to apply to greenhouse gas emissions to $50 a ton by 2022, from $20 a ton now, but the current program has considerable exemptions for large emitters. The Conservatives — who have adopted the same emission cut targets as the Liberals — want to shift the burden to large corporate emitters.
Both main parties want to build the Trans Mountain oil pipeline, which the Trudeau government bought last year for $4.5 billion after Kinder Morgan Inc. walked away. This project, anyhow, is out of the hands of politicians and in the hands of he courts.
The bigger debate is whether the Trans Mountain pipeline — if it gets built at all — would be the country’s last. The Conservatives claim the Liberals have put so many obstacles in the way of future development that no new energy infrastructure will ever be built, and have pledged to repeal tougher environmental and regulatory oversight while promoting an energy corridor across the country. The Liberals have shown little enthusiasm for new pipelines beyond Trans Mountain, and will face a major challenge even building that if they find themselves in a minority government needing the support of anti-pipeline parties.
Residential real estate is one of the hottest topics of the campaign, with all major parties saying they’ll make it easier for Canadians to buy a home. Liberals are pledging to make their first-time home buyer incentive program — in which a government agency chips in on the downpayment — more generous. The Conservatives are planning to extend the maximum mortgage amortization period to 30 years for first-time buyers and change controversial lending rules — the so-called stress tests — introduced under the current government.
The New Democratic Party, currently running third in the polls in terms of popular vote and which could play an important role in a minority government, is planning to create half a million affordable housing units and scrap the federal sales tax on construction of rental space.
The surge of immigrants, along with temporary workers and international students, into the country has become a major driver of growth at a time when there are worries about the impact of high household debt levels and a global economic slowdown. The Liberals have announced a target to bring immigration to 350,000 by 2021, levels that haven’t been hit in more than a century — which Scheer has indicated he will accept.
Canada’s small businesses can expect some relief no matter who wins. The Liberals are hoping to win back favor by promising to eliminate a double taxation on credit card transactions by doing away with “swipe fees” on sales taxes that merchants pay to credit card companies. This would save merchants around $500 million a year.
The Conservatives are pledging to reverse Liberal tax changes for private corporations that outraged the small business community last year.