The Conference Board’s economic growth forecast for Canada in 2014 is about 2 per cent for the third consecutive year – an unimpressive number. Slow growth in government spending accounts for some of it, but a key factor is the sustained weak levels of private investment.
The fiscal adjustment under way is necessary at this point in the business cycle. The federal and provincial governments stepped up during the 2008-09 recession, as they should have, and Canadian governments were consequently pushed into deficit. Now that the economy is growing, restoring fiscal balance within a reasonable time frame and keeping public debt levels under control are essential to responsible and symmetrical fiscal policy.