Canada can focus on long-term economic challenges under stable government
OTTAWA—With a new majority government in place, Canada could carve out a winning economic performance in coming years, according to a new report from the Conference Board of Canada.
The report notes that Canada only placed ninth among 17 peer countries in a recent ranking of economic performance for the year ahead.
That’s despite the fact that Canada has some of the strongest economic fundamentals in the world, from fiscal and tax policies to the management of its exchange rate.
The report says several years of minority governments have brought short-lived, voter-friendly policies. But with a majority government now in power, Canada can finally start to focus on longer-term economic challenges.
It recommends Ottawa iron out policies in five key spots, from promoting productivity to re-thinking its workforce.
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Canadian businesses aren’t maximizing their potential and it’s costing the country in productivity growth, according to the board’s analysis.
For 25 years, Canada has lagged behind the U.S. and other major regions in the Organization for Economic Co-operation and Development (OECD).
“Other countries have had a greater capacity for addressing productivity and making it imperative on the agenda,” says Glen Hodgson, senior vice-president and chief economist with the board.
He says Canadian companies have learned the hard way that they can no longer coast on a soft dollar or look to the U.S. as their main trading partner.
“This is what globalization looks like now. Firms must re-invent themselves, focus on innovation and make sufficient use of possible global markets,” Hodgson says.
The stronger Canadian dollar should act as a catalyst for companies to invest in imported technologies that can help them become more efficient.
Recent data from National Bank Financial suggests many manufacturers have answered the call and are now stepping up their game.
Labour productivity of Canadian factories jumped by 4.2 per cent in the third quarter of 2010 while investments in machinery and equipment, including imported technology, have also risen sharply.
With a majority government now in power, it too will have a bigger role to play.
Embracing productivity and competitiveness should be top on the new government’s economic priority list, according to the board’s analysis.
Hodgson says the government has taken some important steps in recent years through incentive programs and tax reforms to help businesses invest in productivity.
“Now the necessary thing is leadership. Government must signal productivity as a national priority and review every aspect of regulatory structure that could be standing in the way,” he says.