It was a federal election that put Prime Minister Justin Trudeau back to where he left, more than a month and millions and millions of dollars in the works: another minority government.
With just one more seat for the Liberals after this election than the last in 2019, a new cabinet is expected to be announced in the coming days.
So where does that leave the turbulent state of Canada’s finances?
Here’s how economists and business leaders are reacting to the announcement of another term for Trudeau after election day:
Ryan Lewenza, Senior Vice President and Portfolio Manager at Turner Investments
We now have exactly the same thing that we already had before this election. So for us it’s more spending, more deficits, duller GDP growth and probably, more taxes on the way.
What are the drivers of long-term economic growth? Population growth and productivity gains. We have no problem with population growth, which is what makes Canada possibly one of the largest countries in the world. But on the productivity side, that’s where I have concerns. Productivity continues to decline for a variety of reasons, one of which is investment. We continue to see a lack of long-term investment in Canada.
I think we’re going to be in the same boat in five to 10 years that we were in the 90s, when one party was Justin’s dad. [Pierre Trudeau] had spent so much money in the 70s and 80s that we had so much debt… It was unbearable.
When it comes to housing, it’s a question of supply and demand. And the demand is very robust, in part because of the population growth I mentioned. So supply is the problem. Obviously, we need to build more houses.
And a major problem here is that of interest rates. Historically, low central bank interest rates have contributed to the problem. Where in history have you seen a 20 percent year-over-year increase in national home prices, during the most difficult recession in nearly a century?
Kevin Page, former Parliamentary Budget Officer
Because we are reviewing a minority, every finance bill will again be a vote of confidence. The Liberals went through this for a few years and I am sure there will be many more.
It will take a few weeks for the dust to settle around the election. Immediately the transition will begin with a public service – they will prepare a speech from the throne. I think we can expect something like that from the end of October, when they will set the agenda for the next parliamentary session.
We will see many of the initiatives highlighted in the [election] platform and how they will go forward with it. I think we’ll see a mini-budget or fall update probably in November. I think the Liberals learned a lesson that, you know, a lot of people are wondering why we had this election. So I think they can’t afford to wait to move forward with these early initiatives.
There will be a lot of spending and a higher deficit than the PBO predicted a few months ago… How we cut these subsidies and budget support programs will really depend on our progress to actually reduce the number of infections. to COVID-19.
I think the Liberals can borrow some of the ideas from the Conservatives to start thinking about some of the investments we need to boost confidence and growth.
John Aiken, Research Manager for Canada at Barclays Bank
The proposed liberal surtax on Canadian banks has the initial reaction that it is negative, that it is a drag on bank profits.
The three percent tax is pretty significant, depending on how it all fits. At this time, we believe it will only apply to Canadian earnings. However, there are not enough details… We don’t know how it will be applied, we don’t know if it will be on profits, on capital, or how it will be distributed on financials.
Granted, there are a lot of spending initiatives in the Liberals’ platform, they must have paid for them somewhere, but we actually find it quite surprising that they target finance in particular, not just some of the other areas that did very well during the pandemic.
John Manley, Senior Advisor at Bennett Jones, Former Deputy Prime Minister and Former Minister of Finance
An unfortunate comment from Kim Campbell years ago that election campaigns are not a place to seriously discuss important issues seems to have played into this campaign.
I don’t think we see much appetite to cut spending. So the only way to deal with this incredible amount of spending that occurred during the pandemic is to see the economy grow. We’re going to have to get through this and that means the investment has to follow.
Foreign investment is one side of the coin, but retention of Canadian investment is another. A combination of tax policy and other policies – regulatory, in particular – has prompted many Canadian companies to invest abroad rather than here at home.
We need to turn the tide, we need to make Canada a welcoming place for investment, we need to reward innovation and resilience, and we need to reward success.