JOE OLIVER VISITS TURKEY
“Our Government’s sound economic management and unwavering commitment to balance the budget this year—while creating jobs, growth and long-term prosperity for Canadians—has resulted in a resilient economic performance in a challenging global economy. As Canada is doing with its Economic Action Plan, we encourage G-20 countries to follow through on their commitments to create jobs and a strong, sustainable and balanced global economy.”
This is a statement from Joe Oliver, released by the Department of Finance, as he left for the G-20 meeting of Finance Ministers in Turkey last week.
What in the world was the Finance Minister thinking when he released this statement? Was he hoping that no one in Canada would read it?
This is the same banal statement the Finance Department releases every time there is a G-7 or G-20 Finance Ministers meeting. It is of course a silly statement but it would be nice if Joe Oliver could have the Finance Department check its facts and update it.
What “sound economic management” is Oliver talking about in his statement? The Conservative’s economic growth strategy has been based on reducing the size and relevance of the Federal government in the management of the economy for the past eight years. And they have definitely succeeded.
This government has adopted an “austerity led growth” strategy. The result has been austerity without growth. Annual economic growth has fallen every year since 2010. Forecasters, including the Bank of Canada, are lowering their growth forecasts for 2015 to below 2 per cent, a far cry from the almost 2.5 per cent they were forecasting only a few months ago.
The decline in oil prices has also resulted in economists revising down their outlook for inflation. Nominal GDP, the broadest base for calculating government revenues, is now expected to be significantly lower than earlier forecast. In the November 214 Update, Oliver forecast nominal GDP growth at 3.7% for 2015. Now most private sector economists expect it to be around 2%. This will result in much lower federal revenues.
According to Oliver’s statement the government has an “unwavering commitment to balance the budget”, but right now, because of lower oil prices, no one believes that Oliver can do it without some “voo doo” budget magic. Most Canadians are also wondering why eliminating the deficit is so important especially when economic growth continues to slow and unemployment remains so high.
What is this talk by Oliver about creating jobs? In 2014, only 121,000 jobs, roughly 10,000 a month, were created. According to the Bank of Canada this is about 3,500 fewer jobs a month than would be expected at this stage of the recovery, and the economy is currently 270,000 jobs short of full employment. Employment growth is simply not keeping up with population growth even allowing for demographic changes.
The unemployment rate is stuck between 6.5 and 7 per cent. The labor force participation rate is at its lowest level since 2002. In January, the increase in employment was due primarily to part-time and self-employment. Full time employment actually fell. The impact of lower oil prices on employment has not yet been felt. It will show up in the employment and unemployment numbers in the coming months.
What is this talk by Oliver about “growth and long–term prosperity”? The International Monetary Fund (IMF) has been warning for months that the global economy and the Canadian economy are about to enter a period of global economic stagnation, high unemployment and growing income inequality. Potential economic growth in Canada has fallen from almost 3 per cent per year a decade ago to under 2 per cent now. The Conservative government’s strategy to strengthen potential economic growth has been built entirely on building pipelines, and false “hope”, and we know where this has got us.
According to the statement Mr. Oliver wants to “ encourage G-20 countries to follow through on their commitments to create jobs”. This is the one part of Oliver’s statement that makes sense. But what does it mean? It means implementing the G-20 agreement made last year in Australia for each G-20 country to introduce “incremental” infrastructure spending so as to raise global GDP by 2.1% by 2018. The key word is “incremental”.
What is Mr. Oliver going to say? He will conveniently ignore the word “incremental” and simply list everything the Conservative government has done for the past eight years. After all, Mr. Oliver, only a couple of weeks ago, told the Premiers and Mayors who requested more infrastructure spending to get lost.
The Harper government believes it has done enough even though there is a huge infrastructure deficit in Canada. The provinces and mayors have called on the federal government to help them in addressing this infrastructure gap, but Harper refuses to meet with them.
Who isn’t in favor of Oliver’s commitment to “sustainable and balanced global economy”, especially since the global economy is actually heading in the opposite direction by becoming less and less balanced and less and less sustainable?
The EURO area is in the tank. Greece is threatening the very existence of the EURO. There is no recovery in site for the EURO. The geopolitics of the Ukraine has thrown the EU into a state of confusion and denial. China is in a long-term growth slowdown, as are other Asian economies. Russia is heading into a financial and economic meltdown. There is nothing balanced about the global economy and financial markets and exchange rates are rapidly becoming misaligned. This will make global economic prospects even more problematic.
In 2009, the G20 showed that, when confronted with a serious crisis, it was capable of implementing a credible coordinated strategy to support global economic growth. Since then, the G20 has become another talkfest without any credible follow up policy actions. The global economy has never recovered from the 2009-2010 financial meltdown and recession. As the IMF keeps saying, the global economy is entering a period of secular global stagnation. This is a crisis just as serious as the crisis of 2009.
We had hoped that the G20 finance ministers and Central Bank Governors, who met in Turkey last week, would rise to the challenge again with an ambitious coordinated global infrastructure strategy that would provide a much needed boost to global economic demand. We had hoped that Canada would play an important part of that G20 initiative.
But of course like past G20 Finance meetings these hopes would go unfulfilled.
The G-20 communiqué released on February 10th was full of promises “to act”, commitments “to act”, and requests “to act”. There were commitments “to continuously review”, “to continue to assess”, and “to continue to promote” and most importantly “determined to overcome”.
What was missing was a G20 action plan adopted to “create jobs and a strong, sustainable and balanced global economy.”
Hope you had a great trip Joe.
Shouldn’t you be working on the budget?