OTTAWA — Prime Minister Justin Trudeau talked up Canada’s economic advantages to global investors on a day when the central bank sharply lowered expectations for how quickly the economy will grow.
Their messages, though different, were not inconsistent.
Speaking to the World Economic Forum in Davos, Switzerland, Trudeau touted a diverse, educated and innovative workforce, taking a sharply different tack than — and a political shot at — the Conservative government of Stephen Harper that had branded Canada as an energy superpower.
“My predecessor wanted you to know Canada for its resources,” said Trudeau. “Well I want you to know Canadians for our resourcefulness.”
He pitched Waterloo, Ont., as a place for innovation, Whistler, B.C., as a place to ski, and Ottawa as the home to a new government that embraces “diversity” and is willing to invest big in infrastructure “that supports change,” policies that encourage science, innovation and research, and recognizes “dynamic innovation happens in the private sector.”
Natural resources “will always be the basis of the Canadian economy. But Canadians also know fully well that growth and prosperity is not just a matter of what lies under our feet but what lies between our ears,” Trudeau said in French.
He acknowledged low oil prices pose “a challenge” to implementing his agenda.
Yet he hinted the oil patch will face more change, tying “clean” environmental policies to growth. Canada had “an awful lot of trouble getting our pipelines built, getting our resources to market because a lot of Canadians and even our trading partners and friends have decided that Canada isn’t doing its share and isn’t responsible around the environment,” he said.
Meanwhile, in Ottawa, Bank of Canada governor Stephen Poloz said low oil and commodity prices have led to a “significant setback” for the Canadian economy and the bank’s expectations for it, but he urged patience.
The bank held the key overnight lending rate at 0.5 per cent. It said the oil price shock had hit oil-producing provinces hard and was rippling through the broader economy, but a lower dollar was helping the non-energy sectors and, overall, the economy is slowly adjusting, though it could take three years or more.
The central bank now projects the economy will grow by 1.4 per cent in 2016, a slower pace than the 2 per cent growth it projected last fall. But it’s still growth, and the bank is betting on further growth of 2.4 per cent by the end of 2017.
Poloz said the bank considered lowering the rate but was aware of the “government’s intention to introduce fiscal measures to stimulate the economy,” meaning its promise to spend big — $60 billion over 10 years — on infrastructure. But the bank didn’t factor that into its forecast or policy because its practice is “not to guess these things, but to incorporate actual announcements.” The bank says much would depend on the timing, size and types of fiscal measures.
Reuters, citing an unnamed source, reported the federal budget could be delayed to April — a late drop for any government.
Trudeau gave few hints while abroad how soon he will move.
His speech was a relentlessly optimistic and brazen investment pitch in the face of somber economic indicators. He said Canada embraces the global push toward a low-carbon economy, saying it “will produce new companies, new growth and new prosperity.”
“If you are looking for a country that has the diversity, the resilience, the positivity and mostly the confidence that will not just manage this change but take advantage of it, there has never been a better time to look to Canada,” Trudeau told the audience of business and financial leaders gathered for the annual schmooze-fest in the Swiss Alps.
Jayson Meyers, the head of Canadian Manufacturers and Exporters, said while non-energy exports are up 25 per cent over the past two years, it would be a “mistake” for Trudeau to discount the resource sector. “I think a lot of those exports and the technologies themselves are based on what happens in the resource sector,” said Meyers.
And Meyers worried what the government’s plans will mean for higher pension costs or carbon taxes, under a cap-and-trade system to fight climate change.
“I’d caution the federal government: don’t do anything to increase taxes on consumers and business that would counteract the fact of positive fiscal stimulus (like infrastructure).” He said it will take a long time for the government to get the money out the door and the impact in terms of jobs and increased spending to be felt.