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Economy Lab

Delving into the forces that shape our living standards
Best Business Blog, EPPY awards, 2011 and 2012

Entry archive:

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Public investment can trump budget surpluses in lowering Canada’s debt


With the federal budget set to return to balance this fiscal year, we can once again debate how to deal with future surpluses. Priority could be given to paying down the debt, cutting taxes, or re-investing in public services and social programs.

These options should be judged on how much they contribute to a stronger economy as well as a fairer and more inclusive society.

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Aggressive growth policies a priority after Ottawa balances its budget


The goal line of a balanced federal budget in 2015 is in sight, just as the Conference Board of Canada projected four years ago. What next? Within the framework of a balanced budget, the next federal government – regardless who forms it – should be investing in growth as its core budget strategy.

Here’s the economic context for that advice, which the Conference Board gave to the House of Commons finance committee last week. Canada’s economy is expected to grow by 2.2 per cent in 2014 and improve to 2.6 per cent in 2015, on the coattails of a strengthening U.S. economy. However, we do not expect that higher rate of growth to last. Aging demographics are already affecting Canada’s labour force, a key driver of growth, and these pressures will only grow as more and more baby boomers prepare to retire. Canada’s growth in 2016 and beyond will be slower; our estimate for future long-term growth potential of 2 per cent is a full percentage point below growth potential less than a decade ago.

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The economic basket case that is the euro zone


Although the recession ended five years ago, our economy remains in a rut. Economic growth is sluggish, the labour market shows too much long-term unemployment, and exports are very far below normal. Our policy makers wait patiently for a solid U.S. recovery to pull us from the doldrums. But whatever problems we face in Canada, we should be grateful to be far away from Europe, where the situation is very much worse.

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Dissecting the false claims of ‘monopoly’


Confucius once said that when words lose their meaning, people lose their liberty. George Orwell mined this rich idea in both Animal Farm and Nineteen Eighty-Four, showing how political authorities crave to redefine inconvenient words, making them tools of ideology rather than enemies of obfuscation.

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The depressing future of income inequality


Best-selling author Thomas Piketty argues in his book, Capital in the Twenty-First Century, that inequality is set to return to the extreme levels of the “Gilded Age” of the late nineteenth century when very large shares of income and wealth were concentrated in the hands of the super rich. And he is far from alone.

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Sinking loonie masking the dire state of Canada’s competitiveness


In the spring of 2013, when the Canadian dollar was trading at parity, we might have surprised some investors by claiming that Canada’s loss of competitiveness and fading sentiment on commodities would eventually catch up and start pressuring the loonie down.

This scenario came to fruition in the past year, in part a result of the change of tone from the Bank of Canada, which removed its tightening bias that indicated interest rates could rise sooner than expected and moved to a more dovish stance, signalling that interest rates could now be lowered if need be.

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