Every 0.1 per cent decrease in annual GDP growth leads to an increase in the federal deficit of around $500 million. Given this is already one of the longest periods of economic expansion on record, continued straight-line GDP growth for five more years seems unlikely.
Irrespective of a recession, our economy is facing considerable uncertainty brought on by NAFTA renegotiations. The Bank of Canada has already said they are projecting this uncertainty will reduce investment and export growth. The longer those negotiations drag on, the greater the damage.
A rainy day will undoubtedly come at some point, and our government is choosing to not pack an umbrella.
On the taxation side, this federal budget left a lot to be desired. With the U.S recently increasing their competitiveness by reforming their tax system, our federal government instead chose to sit on their hands.
While at least the small business tax changes are clearer now, they still move our tax code in the wrong direction. What is urgently needed is a review of our entire taxation system so it best encourages growth and prosperity. We can no longer tweak on the edges – a comprehensive review is needed urgently.
Further to reducing red tape, the federal government is planning to reduce the current number of business innovation programs by up to two-thirds. The current 92 different business innovation programs buried across departments represent a virtual maze for entrepreneurs to navigate. Funding won’t decrease, so simplifying and streamlining programming is a positive step.
Locally, the budget includes a commitment to introduce legislation to enable Western Economic Diversification to collaborate more effectively with provinces. With our provincial government currently developing an economic development strategy, the timing couldn’t be better. The more both levels of government collaborate in this area, the more effective business programming we will see.
The budget also makes commitments to improve female entrepreneurship and workforce participation. If successful, those steps could also provide additional economic growth. Improving the Working Income Tax Benefit and making further investments to create a new Indigenous skills and training strategy are both positive steps forward.
On the whole, however, this federal budget doesn’t go far enough to address the competitiveness challenges we face. It continues to strain the government credit card with no end in sight.
Challenges are on the horizon. This federal budget doesn’t go far enough to address them.
For further information on this and other Chamber advocacy initiatives, please contact Director of Advocacy, Michael Juce, at [email protected] or 204-944-3315.