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Federal government’s ‘fudget budget’ relies on fanciful assumptions of productivity growth

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From the Fraser Institute

By Niels Veldhuis and Jake Fuss

Labour productivity isn’t growing, it’s declining. And stretching the analysis over the Trudeau government’s time in office (2015 to 2023, omitting 2020 due to COVID), labour productivity has declined by an average of 0.8 per cent. How can the Trudeau government, then, base the entirety of its budget plan on strong labour productivity growth?

As the federal budget swells to a staggering half a trillion dollars in annual spending—yes, you read that correctly, a whopping $538 billion this year or roughly $13,233 per Canadian—and stretches over 430 pages, it’s become a formidable task for the media to dissect and evaluate. While it’s easy to spot individual initiatives (e.g. the economically damaging capital gains tax increase) and offer commentary, the sheer scale and complexity of the budget make it hard to properly evaluate. Not surprisingly, most post-budget analysts missed a critically important assumption that underlies every number in the budget—the Liberals’ assumption of productivity growth.

Indeed, Canada is suffering a productivity growth crisis. “Canada has seen no productivity growth in recent years,” said Carolyn Rogers, senior deputy governor at the Bank of Canada, in a recent speech. “You’ve seen those signs that say, ‘In emergency, break glass.’ Well, it’s time to break the glass.”

The media widely covered this stark warning, which should have served as a wake-up call, urging the Trudeau government to take immediate action. At the very least, this budget’s ability—or more accurately, inability—to increase productivity growth should have been a core focus of every budget analysis.

Of course, the word “productivity” puts most people, except die-hard economists, to sleep. Or worse, prompts the “You just want us to work harder?” questions. As Rogers noted though, “Increasing productivity means finding ways for people to create more value during the time they’re at work. This is a goal to aim for, not something to fear. When a company increases productivity, that means more revenue, which allows the company to pay higher wages to its workers.”

Clearly, labour productivity growth remains critical to our standard of living and, for governments, ultimately determines the economic growth levels on which they base their revenue assumptions. With $538 billion in spending planned for this year, the Trudeau government better hope it gets its forecasts right. Otherwise, the $39.8 billion deficit they expect this year could be significantly higher.

And here’s the rub. Buried deep in its 430-page budget is the Trudeau government’s assumption about labour productivity growth (page 385, to be exact). You see, the Liberals assume the economy will grow at an average of 1.8 per cent over the next five years (2024-2028) and predict that half that growth will come from the increase in the supply of labour (i.e. population growth) and half will come from labour productivity growth.

However, as the Bank of Canada has noted, labour productivity growth has been non-existent in Canada. The Bank uses data from Statistics Canada to highlight the country’s productivity, and as StatsCan puts it, “On average, over 2023, labour productivity of Canadian businesses fell 1.8 per cent, a third consecutive annual decline.”

In other words, labour productivity isn’t growing, it’s declining. And stretching the analysis over the Trudeau government’s time in office (2015 to 2023, omitting 2020 due to COVID), labour productivity has declined by an average of 0.8 per cent. How can the Trudeau government, then, base the entirety of its budget plan on strong labour productivity growth? It’s what we call a “fudget budget”—make up the numbers to make it work.

The Trudeau fudget budget notwithstanding, how can we increase productivity growth in Canada?

According to the Bank of Canada, “When you compare Canada’s recent productivity record with that of other countries, what really sticks out is how much we lag on investment in machinery, equipment and, importantly, intellectual property.”

Put simply, to increase productivity we need businesses to increase investment. From 2014 to 2022, Canada’s inflation-adjusted business investment per worker (excluding residential construction) declined 18.5 per cent from $20,264 to $16,515. This is a concerning trend considering the vital role investment plays in improving economic output and living standards for Canadians.

But the budget actually hurts—not helps—Canada’s investment climate. By increasing taxes on capital gains, the government will deter investment in the country and encourage a greater outflow of capital. Moreover, the budget forecasts deficits for at least five years, which increases the likelihood of future tax hikes and creates more uncertainty for entrepreneurs, investors and businesses. Such an unpredictable business environment will make it harder to attract investment to Canada.

This year’s federal budget rests on fanciful assumptions about productivity growth while actively deterring the very investment Canada needs to increase living standards for Canadians. That’s a far cry from what any reasonable person would call a successful strategy.

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Bruce Dowbiggin

Integration Or Indignation: Whose Strategy Worked Best Against Trump?

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““He knows nothing; and he thinks he knows everything. That points clearly to a political career.” George Bernard Shaw

In the days immediately following Donald Trump’s rude intervention into the 2025 Canadian federal election— suggesting Canada might best choose American statehood— two schools of thought emerged.

The first and most impactful school in the short term was the fainting-goat response of Canadian’s elites. Sensing an opening in which to erode Pierre Poilievre’s massive lead in the 2024 polls over Justin Trudeau, the Laurentian elite concocted Elbows Up, a self-pity response long on hurt feelings and short on addressing the issues Trump had cited in his trashing of the Canadian nation state.

In short order they fired Trudeau into oblivion, imported career banker Mark Carney as their new leader in a sham convention and convinced Canada’s Boomers that Trump had the tanks ready to go into Saskatchewan at a moment’s notice. The Elbows Up meme— citing Gordie Howe— clinched the group pout.

(In fact, Trump has said that America is the world’s greatest market, and if those who’ve used it for free in the past [Canada] want to keep special access they need to pay tariffs to the U.S. or drop protectionist charges on dairy and more against the U.S.)

The ruse worked out better than they could have ever imagined with Trump even saying he preferred to negotiate with Carney over Poilievre. In short order the Tories were shoved aside, the NDP kneecapped and the pet media anointed Carney the genius skewing Canada away from its largest trade partner to the Eurosphere. We remain in that bubble, although the fulsome promises of Carney’s first days are now coming due.

Which brings us to the second reaction. That was Alberta premier Danielle Smith bolting to Mar A Lago in the days following Trump’s comments. Her goal was to put pride aside and accept that a new world order was in play for Canada. She met with U.S. officials and, briefly, with Trump to remind them that Canada’s energy industry was integral to American prosperity and Canadian stability.

Needless to say, the fainting goats pitched a fit that not everyone was clutching pearls and rending garments in the wake of Trump’s dismissive assessment of his northern neighbours. Their solution to Trump was to join China in retaliatory tariffs— the only two nations to do so— and to boycott American products and travel. Like the ascetic monks they cut themselves off from real life. Trump has yet to get back to Carney the Magnificent

And Smith? She was a “traitor” or a “subversive” who should be keel hauled in the North Saskatchewan. For much of the intervening months she has been attacked at home in Alberta by the N-Deeps and in Ottawa by just about everyone on CBC, CTV, Global and the Globe & Mail. “How could she meet with the Cheeto?”

Nonetheless conservatives in the province moved toward a more independence within Canada. Smith articulated her demands for Alberta to prevent a referendum on whether to remain within Confederation. At the top of her list were pipelines and access to tidewater. Ergo, a no-go for BC’s squish premier David Eby who is the process of handing over his province to First Nations.

It became obvious that for all of Carney’s alleged diplomacy in Europe and Asia (is the man ever home?) he had a brewing disaster in the West with Alberta and Saskatchewan growing restless. In a striking move against the status quo, Nutrien announced it would ship its potash to tidewater via the U.S., thereby bypassing Vancouver’s strike-prone, outdated port and denying them billions.

Suddenly, Smith’s business approach began making eminent good sense if the goal is to keep Canada as one. So we saw last week’s “memorandum of understanding” between Alberta and Ottawa trading off carbon capture and carbon taxes for potential pipelines to tidewater on the B.C. coast. A little bit of something for everyone and a surrender on other things.

The most amazing feature of the Mark Carney/Danielle Smith MOU is that both politicians probably need the deal to fail. Carney can tell fossil-fuel enemy Quebec that he tried to reason with Smith, and Smith can say she tried to meet the federalists halfway. Failure suits their larger purposes. Which is for Carney to fold Canada into Euro climate insanity and Smith into a strong leverage against the pro-Canada petitioners in her province.

Soon enough, at the AFN Special Chiefs Assembly, FN Chief Cindy Woodhouse Nepinak told Carney that  “Turtle Island” (the FN term for North America popularized by white hippy poet Gary Snyder) belongs to the FN people “from coast to coast to coast.” The pusillanimous Eby quickly piped up about tanker bans and the sanctity of B.C. waters etc.

Others pointed out the massive flaw in a plan to attract private interests to build a vital bitumen pipeline if the tankers it fills are not allowed to  sail through the Dixon Entrance to get to Asia.

But then Eby got Nutrien’s message that his power-sharing with the indigenous might cause other provinces to bypass B.C. (imagine California telling Texas it can’t ship through its ports over moral objections to a product). He’s now saying he’s open to pipelines but not to lift the tanker ban along the coast. Whatever.

Meanwhile the kookaburras of isolation back east continue with virtue signalling on American booze— N.S. to sell off its remains stocks — while dreaming that Trump’s departure will lead to the good-old days of reliance on America’s generosity.

But Smith looks to be wining the race. B.C.’s population shrank 0.04 percent in the second quarter of 2025, the only jurisdiction in Canada to do so. Meanwhile, Alberta is heading toward five million people, with interprovincial migrants making up 21 percent of its growth.

But what did you expect from the Carney/ Eby Tantrum Tandem? They keep selling fear in place of GDP. As GBS observed, “You have learnt something. That always feels at first as if you have lost something.”

Bruce Dowbiggin @dowbboy is the editor of Not The Public Broadcaster  A two-time winner of the Gemini Award as Canada’s top television sports broadcaster, his new book Deal With It: The Trades That Stunned The NHL And Changed hockey is now available on Amazon. Inexact Science: The Six Most Compelling Draft Years In NHL History, his previous book with his son Evan, was voted the seventh-best professional hockey book of all time by bookauthority.org . His 2004 book Money Players was voted sixth best on the same list, and is available via brucedowbigginbooks.ca.

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Carney’s Toronto cabinet meetings cost $530,000

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By Jen Hodgson

Prime Minister Mark Carney’s two-day cabinet meeting in Toronto cost taxpayers more than $532,000, records reviewed by the Canadian Taxpayers Federation show. Carney’s cabinet meetings cost thousands of dollars more than recent cabinet retreats hosted by former prime minister Justin Trudeau.

“If you’re spending thousands of dollars more than Trudeau on meetings, you’re spending too much money,” said Franco Terrazzano, CTF Federal Director. “It’s going to be hard for politicians to explain to taxpayers why all of the meeting rooms in Ottawa weren’t good enough.”

Carney’s two-day cabinet meeting was held at the Pan Pacific Toronto in September, according to government records submitted in response to an Order Paper Question. Pan Pacific’s website describes itself as a “luxury hotel.”

The Privy Council Office spent $250,400 on the venue and “hospitality,” $78,700 for audiovisual services, $40,000 for security and $8,073 on shipping. The PCO spent another $38,300 on accommodation, meals and transportation.

The total bill to taxpayers may balloon higher. The PCO noted costs only include expenditures processed as of Sept. 23. “Certain associated travel claims and invoices may still be awaiting submission or receipt,” wrote the PCO.

The Royal Canadian Mounted Police spent $29,000 on the cabinet meeting. That only includes expenditures processed as of Sept. 17.

The Translation Bureau charged taxpayers $30,600 for travel expenses, travel time and interpretation services.

Other departments also spent $57,400 for the cabinet meeting. Most of that was for transportation, but some ministers charged taxpayers for meals and accommodation for themselves and their staff.

Carney’s Toronto cabinet meeting cost more than recent cabinet meetings hosted by Trudeau.

Trudeau’s cabinet retreat to Charlottetown, P.E.I., in August 2023, cost taxpayers $485,196. Even after adjusting for inflation, Trudeau’s cabinet retreat cost about $26,000 less than Carney’s.

The Trudeau government also held a cabinet meeting in Vancouver in 2022. It cost taxpayers $471,070. Even after adjusting for inflation, Trudeau’s cabinet retreat cost about $25,000 less than Carney’s.

“Carney told Canadians he was going to cut waste and he should start by not dropping half a million bucks on meetings,” Terrazzano said. “We need a culture change in Ottawa and that needs to start with the prime minister and ministers respecting taxpayers’ hard-earned money.”

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