Most Canadians probably missed the Prime Minister’s speech on the economy on June 13, in which he talked at length about declining productivity and the threat it poses to the country’s future.
“Productivity growth is more than just a box to tick, it’s essential for sustaining and sharing economic growth, building long-run prosperity and improving living standards,” he said. He pledged that his left-leaning government will “drive a new wave of productivity in our big firms and our small businesses and our startups.”
The speech was a call to arms to deal with flagging productivity, a call that Canadians have long waited for. And they’ll have to wait some more. That speech was by Australian Prime Minister Anthony Albanese, laying out a path for his Labour government to reinvigorate his country’s economic growth.
Canada and Australia have much in common: former British colonies, a common-law heritage, abundant natural resources and export-oriented economies. But over the past three decades, Australia’s economic growth has outstripped Canada’s, leapfrogging this country in the key measure of gross domestic product per capita.
As the accompanying chart shows, Australia lagged Canada in 1990, with GDP per capita equal to just 85 per cent of this country’s. (The figures from the Organization for Economic Co-Operation and Development are based on U.S. dollars pegged to 2015, and adjusted for purchasing power to eliminate distortions from exchange rates.)
By 2009, that gap had disappeared. And from then on, a gap opened in the opposite direction; by last year, Canada’s real GDP per capita was just 93 per cent of Australia’s.
No economic story can be boiled down to a single factor, but one difference stands out: Australia has dramatically expanded its production of natural gas and the infrastructure for exporting that fuel in liquefied form.
In 2015, Australia’s gas production was less than half of Canada’s. But in the following six years, its production exploded, more than doubling by 2022 and closing the gap with Canada. More important, Australia has a massive LNG industry, with 10 facilities, vying for the world’s top exporter. Canada has talked for years about LNG, but the first facility is still under construction.
The Australian advantage extends to mining, too. A recent report from S&P Market Intelligence noted that it takes an average of 17.9 years to build a mine in Canada, from discovery of a resource to the start of production, well above the global average of 15.7 years. And in Australia? Just 14.5 years, well under the average. The report notes that the permitting process is viewed as the prime source of delays in Canada, particularly the overlapping federal and provincial reviews. In the race to bring critical minerals to market, two-plus years can make a big difference.
Those are structural barriers in Canada that Australia doesn’t have, some of which are longstanding, particularly jurisdictional overlap. It would be unfair to lay all the blame at Ottawa’s feet. Still, when was the last time Canadians heard Prime Minister Justin Trudeau championing the LNG industry? (Trick question.)
Surely, however, Australia’s expansion of its fossil fuel industry – particularly given it is a major coal producer – must have come at a heavy environmental cost? Not so. Since 2015, Australia’s per capita emissions of greenhouse gases have fallen 10.3 per cent, on pace with the 11-per-cent reduction in Canada. (Those figures don’t take into account the carbon footprint of the exported fossil fuels of either country.)
Australians still have a slightly heavier carbon footprint than Canadians, but the gap has narrowed considerably. Mr. Albanese has committed to aggressive reductions.
More to the point, Australia and its prime minister seem to have grasped a key point that eludes Mr. Trudeau: a more productive economy is better able to shoulder the costs of a transition to a greener future.