Columnist image
Temur Durrani

Multi-Platform Writer


It’s a federal election that put Prime Minister Justin Trudeau right back where he started from: another minority government.

With just one more seat for the Liberals after this election than the last one in 2019, a new cabinet is expected to be announced in the coming days.

So, where does that leave the turbulent state of Canadian finances?

Here’s how economists and business executives are reacting to another mandate for Trudeau following Election Day:

Ryan Lewenza, senior vice-president and portfolio manager at Turner Investments

I don’t see the Liberals growing their way out of this debt problem: Portfolio manager

Ryan Lewenza, senior vice president and portfolio manager at Turner Investments joins BNN Bloomberg to discuss the results of the 2021 federal election. He says that he does not see the government growing their way out of their debt problem, adding, "I think Canada will be in the same boat in 5-10 years as we were in the '90s."

We now have the exact same thing that we already had going into this election. So, for us, this is more spending, more deficits, more lacklustre GDP growth, and likely, more taxes on the way.

What drives economic growth over the long-term? Population growth and productivity gains. We have no problem with the population growth, that’s what makes Canada probably one of the greatest countries in the world. But on the productivity side, that’s where I have concerns. Productivity continues to decline for a whole host of reasons — one of which being investments. We continue to see a lack of long-term investments in Canada.

I think we’re going to be in the same boat five to 10 years from now as we were in the ‘90s, when part of it was Justin’s father [Pierre Trudeau] had spent so much money over the ‘70s and ‘80s to the point where we had so much debt… It was unbearable.

When it comes to housing, it’s about supply and demand. And the demand is very robust, in part because of the population growth that I talked about. So supply is the issue. Clearly, we need to build more homes.

And a major issue here is interest rates. Historically, low interest rates from the central bank are contributing to the problem. Where in history have you seen a 20 per cent year-over-year increase in national home prices, during the most difficult recession in nearly a century?

Kevin Page, former parliamentary budget officer

There will be more pressure to increase the deficit in the coming years: Former PBO

Kevin Page, president of Institute of Fiscal Studies and Democracy, University of Ottawa, and former parliamentary budget officer, joins BNN Bloomberg to discuss his outlook for Canada’s fiscal outlook following the Liberal party’s win of the national election. He notes the government needs to start thinking about the investments Canada needs to boost confidence and growth in the economy.

Because we see a minority again, every financial bill will be a vote of confidence once again. The Liberals have lived through that for a few years and I’m sure there will be many more years of that.

It will take a few weeks for the dust to settle around the election. Immediately, the transition will start with a public service — they will prepare a speech from the throne. I think we can expect something like that as early as late October, where they will lay out the agenda for the next parliamentary session.

We’ll see a lot of the initiatives highlighted in the Liberal [election] platform and how they will move forward with it. I think we’ll see a mini-budget or a fall update probably in November. I think the Liberals have learnt a lesson that, you know, a lot of people are wondering why did we have this election. So, I think they can’t afford to wait to move forward on those early initiatives.

There will be a lot of spending and a higher deficit than what the PBO projected a few months ago… How we will taper out those subsidies and fiscal support programs will really depend on our progress on really reducing the number of COVID-19 infections.

I think the Liberals can borrow some of the insights from the Conservatives to start thinking about some of the investments we need to boost confidence and growth.

John Aiken, head of research for Canada at Barclays bank

The banks were not the only sector that benefited throughout the pandemic: Analyst

John Aiken, head of research (Canada) at Barclays, joins BNN Bloomberg to discuss the impact of the proposed Liberal tax on the financial sector. He notes the targeted approach on Canadian banks and insurers is a shot at the sector that other sections of the economy are not facing despite also gaining profits amid the pandemic.

The proposed Liberal surtax on Canadian banks has the initial reaction that this is negative, that this is a drag on the banks’ earnings.

The three per cent tax is fairly material, depending on how it all falls in. Right now, we believe it’s only going to be applied to Canadian earnings. However, there’s not enough details… We don't know how it’s going to be applied, we don’t know if it’s going to be on earnings, on capital, or how it’s going to be spread on financials.

Granted, there’s a lot of spending initiatives in the Liberals’ platform, they had to pay for it from somewhere, but we find it actually kind of surprising that they’re targeting the financials in particular, not just some of the other sectors that have done very well during the pandemic.

John Manley, senior advisor at Bennett Jones, former Liberal deputy prime minister and former finance minister

We’ve got to make Canada a welcoming place for investment: John Manley

John Manley, senior advisor at Bennett Jones, former deputy PM, and former finance minister joins Paul Bagnell to discuss how Canada should deal with the amount of debt it incurred from the pandemic. He says, "The only way we deal with this incredible amount of spending that occurred during the pandemic is to see the economy grow, through investment."

An ill-fated comment from Kim Campbell years ago, that election campaigns are no place to have a serious discussion of important issues, seems to have played out in this campaign.

I don’t think we see much appetite to reduce spending. So, the only way we deal with this incredible amount of spending that occurred during the pandemic, is to see the economy grow. We’re going to have to grow our way out of it and that means investment has to follow.

Foreign investment is one side of the coin, but retention of Canadian investment is another. A combination of tax policy and other policies — regulatory, in particular — has been causing many Canadian firms to invest abroad rather than here at home.

We’ve got to reverse that, we’ve got to make Canada a welcoming place for investment, we’ve got to reward innovation and resilience and we’ve got to reward success. 

Goldy Hyder, president and chief executive officer of the Business Council of Canada

Canada should play into its human resources strengths to grow economy: CEO

The Liberals take a minority government mandate and with it comes more spending for a greener economic recovery. Goldy Hyder, president and CEO of Business Council of Canada joins BNN Bloomberg to discuss government spending and the growing deficit.

I wish I could say there was a healthy discussion about business issues and economic concerns during this election, but there weren’t. Although there are many things we are looking forward to. 

We were very supportive of the child care agenda. 

The No. 1 issue I hear from business leaders when we’re not talking about the pandemic is really labour shortage. It’s very severe and it’s going to have both short-term and longer-term economic consequences if we don’t address that. Child care is one of the ways, and frankly, a really affordable way — probably net zero when it’s all considered that it won’t cost much — to get people back to work and to get them the vehicle with which to get back to work.

We’re pleased to see the national emphasis also on infrastructure and a corridor of some kind. We’re a trading a nation, we need to have our arteries open — unclogged and functioning — whether it’s our ports, or our airports, or our railway system or otherwise. 

James Moore, senior business advisor at Dentons, former Conservative industry minister 

The window for Trudeau to do something substantive is getting tighter and tighter: James Moore

James Moore, Dentons senior business advisor and former industry minister, about the Liberal minority win. He says the lack of a majority win should be seen as a warning from voters for government to get back to work. And given no other Prime Minister has won a fourth term as yet, he says Trudeau's third term will be a crucial time to get things passed.

I think we also have to consider that many Liberal party members are now probably realizing they are never getting into cabinet, that they’re never going to ascend to the heights of public perception of power and authority within this government. And so, they’re going to start striking out, they’re going to try to qualify for their pensions, they’re going to push parliamentary bills and start breaking away. 

There’s going to be whispers of a leadership race that will start coming in about 12 to 18 months’ time. So, the window for Prime Minister Justin Trudeau to do something significant, substantive and hold his party together is tight. And if he considers running for a fourth time, even if he wants to, that window gets tighter and tighter. 

Then, there’s climate change. Personally, I think there’s cross-party consensus on healthcare that didn’t used to exist and there’s cross-party consensus on immigration, that didn't used to be the case either. I actually think that there could be cross-party consensus on climate change, in some kind of a pricing model for carbon that gets agreed to by provinces that are blue and red, and we can start moving ahead. 

My view is that by the time the next campaign comes around in 2023, COVID will be behind us and we will either be in herd immunity or vaccination booster shots. I think we’ll have turned the corner and the public is mentally absolutely going to turn the corner on climate change. 

And therein lies the opportunity.