Canadians are in a pessimistic mood when it comes to expectations for the economy in 2019.
According to a Nanos survey for The Globe and Mail, more than half of Canadians think the economy will worsen or somewhat worsen over the next year.
Pollster Nik Nanos said the state of the economy will influence the tone of the political debate heading into the fall 2019 federal election.
“This should be a cautionary signal in terms of a lack of confidence for the future strength of the economy and politicians should take note, because usually economic issues are a key driver of voter behaviour,” he said.
In a recent year-end speech, Bank of Canada Governor Stephen Poloz said the Canadian economy has been operating near its capacity for more than a year, unemployment is at its lowest in decades and inflation is on target. Yet there is growing concern that the global economy is poised for a slowdown, which would affect Canada.
Mr. Poloz told a Toronto business audience on Dec. 6 that the bank’s forecasts call for a “moderation” of economic growth in the fiscal year that starts April 1.
“But this would only bring us to a sustainable growth track and would not be cause for concern,” he said.
The Nanos poll suggests Canadians largely agree with that assessment. When asked whether they expect the Canadian economy will improve, somewhat improve, somewhat worsen or worsen, only 17 per cent selected the most pessimistic option. Another 38 per cent said they expect the economy to somewhat worsen, while 30 per cent said it will somewhat improve and 5 per cent said it will improve. Ten per cent said they were unsure.
The hybrid telephone and online random survey of 1,000 people was conducted between Nov. 30 and Dec. 5, and is considered accurate to within 3.1 percentage points, 19 times out of 20.
The main focus of Finance Minister Bill Morneau’s November fall economic update was an announcement of new tax breaks for business. The move was in response to warnings from the business community that recent U.S. tax cuts made Canada a less attractive place to invest.
However, the update also accounted for billions in spending announced since the February budget, as well as $9.5-billion for “non-announced” measures that will be revealed later.
As a result, the deficit is projected to be $19.6-billion in 2019-20 with no timeline for returning to balance. In the days following the update, Conservative Leader Andrew Scheer repeatedly asked Prime Minister Justin Trudeau in the House of Commons to set a date for erasing the deficit, but Mr. Trudeau did not. The Liberal Party promised in the 2015 election to run short-term deficits and balance the books by 2019. A government website currently describes the status of that promise as: “Actions taken, progress made, facing challenges.” A Dec. 11 report by the Parliamentary Budget Officer took issue with that claim.
“This is a mischaracterization given the remote possibility of achieving balance in that year,” the PBO report stated.
The Nanos survey also asked respondents to choose whether they would prefer that any new revenues in the 2019 budget be used to pay down the deficit or lower corporate taxes. Paying down the deficit was chosen by 85 per cent of respondents, while 10 per cent chose lower corporate taxes.
“I think for many Canadians, although they generally support periodic deficits, it’s not necessarily a carte blanche to have deficits over and over and over again,” Mr. Nanos said.