Economic Recovery Reveals Opportunity for ‘Great Canadian New Beginning’: RBC Report

The Cynthia Leach report offers a path that policymakers can take if they want to increase Canada’s potential growth rate.

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The COVID-19 outbreak caused the worst recession in history, but the recovery represents an opportunity for a “great Canadian start,” the Royal Bank of Canada’s Department of Economic Research argued in a new report.

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“It’s a natural time for policymakers to emerge from the epidemic … to look beyond the recovery to re-evaluate policy frameworks and what Canada is aiming to achieve in the context of this changing global economy,” reports Cynthia Leach. The author, said in an interview.

The Canadian economy grew at an average annual rate of 2.1 percent between 2010 and 2019, about the same as the previous decade, but contracted an average of 2.4 percent between 2000 and 2009, according to Canadian Statistics. The decline reflects a aging population, but also a lack of business investment and productivity growth, which has hampered the country’s ability to build wealth from a declining workforce.

Epidemics can make things worse. In October, the Bank of Canada cut its “potential” growth forecast – the rate at which it thinks the economy can grow without creating too much inflation – to 1.6 percent as the recession has hit investors hard. That is why policymakers such as Finance Minister Chrystia Freeland, who is scheduled to unveil economic reforms on December 14, should prioritize spending that will boost the country’s long-term economic viability, Leach said.

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Ahead of their re-election in September, the Liberal government unveiled a tight budget. The federal government has allocated more than $ 100 billion to guide economic recovery. However, critics, including David Dodge, the former governor of the Bank of Canada, said that spending too little was directed at initiatives that would make the economy more competitive. Instead, Freeland focused on redistribution, widening the deficit to boost COVID’s emergency benefits and funding for various livestock programs that would have little effect on the economy.

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Leach’s report offers a path that policymakers can take if they want to increase the country’s potential growth rate. Leach has selected six “pillars” for its growth policy agenda, including an innovative approach that favors companies with real opportunities in scale.

Despite “above-average” government support in recent years, Canadian businesses have consistently invested less in research and development than their international peers, suggesting the current approach of industrial policy needs to be reviewed, the report said. The shift to a green economy is a clear spot to focus on, and Canada can become a leader if governments focus their spending on carbon offsets, as well as clarify their climate policies so that regulatory uncertainty does not hinder investment. , The report said.

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Another pillar is the digital economy. Data assets become increasingly important as services move online. Should Canada rescind a trade agreement that addresses barriers to international trade? Digital services, and it should protect the intellectual property in the home is lost by technology behemoth International.

Taxes have played a key role in competition, but the federal government has not reviewed tax policy since 1967. Leach called on Congress to reconsider, focusing on reducing holiday pay for special benefits so that personal rates could be reduced to make it more Canadian. Attract international talent.

“It will not be easy,” Leach said. “We’re going to have to get a lot of things right.”

• Email: bbharti@postmedia.com | Twitter:

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