OECD urges Ottawa to spend to boost growth
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Feb 25, 2016  |  Vote 0    0

OECD urges Ottawa to spend to boost growth

Specific measures could include more support for R&D and an end to restrictions on foreign investment in telecom and broadcast companies


Here’s what the OECD thinks Canada should do:

1. Move towards more competitive electricity markets. Sell off Canada Post and eliminate its monopoly. Ease entry regulations into professional services and licensing requirements in retail trade, and eliminate retail price controls.

2. Reduce foreign investment barriers by lifting restrictions in telecommunications, airlines and broadcasting. Reduce the administrative burden of environmental regulation and discrimination against foreign suppliers in professional services, air and road transport.

3. Reform the tax system by increasing environmental and value-added taxes and reducing regressiveincome-tax expenditures to further lower corporate and personal tax rates.

4. Enhance access to post-secondary education through income-contingent loans and needs-based grants. Promote education quality and efficiency by encouraging institutions to specialize in areas where they have a comparative advantage.

5. Improve research and development policies by lowering the refundable small-firm Scientific Research and Experimental Development (SR&ED) rate towards the large firm rate and using the savings in part to raise grants while allocating them competitively.


The Organization of Economic Co-operation and Development has lent its voice to growing calls for more government spending in response to slowing global growth, a policy Canada’s government is already planning to pursue in its first federal budget.

Amid persistently low oil prices and a slowing growth in China, economy, the global economy urgently needs a stronger and more co-ordinated policy response to create jobs and boost equality, the OECD said in its annual Going for Growth report.

Measures specific to Canada could include more support for research and development, better access to post-secondary education, an end to restrictions on foreign investment in telecom and broadcast companies, and privatizing Canada post, the agency said.

The OECD also called for greater government investment in infrastructure projects to create jobs and boost economic growth.

“Today’s exceptionally low interest rates improve governments’ fiscal space, affording a unique opportunity to make investments in infrastructure that will boost demand, stoke growth and actually improve public finances,” OECD Secretary-General Angel Gurría said in an embargoed statement released ahead of the two-day gathering.

The report was to be released Friday in Shanghai at the start of a G20 meeting of finance ministers and central bank governors, which is expected to focus on what to do about the latest economic challenges.

The informal group of 19 countries, including Canada, plus the European Union, has worked to co-ordinate a global response to the financial crisis of 2008-09. But just when it appeared the global economy might be finally pulling ahead, a fresh set of woes sent stock markets and currencies reeling.

“The worrying slowdown in the global economy calls out for an urgent and comprehensive policy response, drawing on all the monetary, fiscal and structural policy levers at governments’ disposal,” Gurría said in the statement.

Governments need to make broad-based changes in their monetary, fiscal and structural policies to stimulate weak demand, boost productivity, create jobs and a more inclusive economy, the OECD said.

Both the OECD and the International Monetary Fund have lowered their forecasts for global growth on persistently low prices for crude oil and concerns about weakness in China, the world’s second largest economy.

The IMF also called this week for greater government spending to boost economic growth.

The pace of global economic reform has slowed since 2013, said the OECD, whose role includes monitoring how much progress the G20 countries have made in meeting their 2014 pledge to boost their combined gross domestic product by 2 per cent over five years.

As an oil producing and exporting nation, Canada has been particularly hit hard by the dramatic plunge in the global price of crude from $100 U.S. a barrel in June 2014 to $30 U.S. Layoffs in the oil-producing regions have plunged Alberta into recession, hit bank earnings this week, and taken a chunk out of the federal government’s revenues.

The Canadian government under Prime Minister Justin Trudeau has pledged to boost infrastructure spending in its first federal budget, to be presented March 22, even though it will mean running a higher federal deficit.

Toronto Star

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