The coming fall fiscal update should outline clear plans to advance energy projects, while also reducing the deficit and boosting immigration, the Business Council of Canada says in a letter to Finance Minister Chrystia Freeland.
Council president and chief executive officer Goldy Hyder’s letter seizes on Ms. Freeland’s speech last week in Washington in which she said Canada must respond to the world’s authoritarian regimes by strengthening trade ties with like-minded democracies, building on U.S. Treasury Secretary Janet Yellen’s call for “friendshoring” as an economic philosophy.
In a speech Wednesday to automakers in Windsor, Ont., Ms. Freeland expanded on her calls for a “muscular industrial policy” based on trade with democratic allies. She also said the date of the fall update will be announced in the coming days and that it will include new measures that respond to the U.S. Inflation Reduction Act, a major package of tax reform and environmental policy approved by Congress earlier this year.
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The minister said that while the U.S. legislation contains elements such as electric-vehicle incentives that are “really positive for Canada,” there are other elements “that our government needs to be thoughtful about and respond to ... We are working on it. You will see some of that in the fall economic statement and you’ll see further action in the budget in the spring.”
Ms. Freeland did not provide details as to what response the government is planning. The council’s letter said the update should outline incentives that Ottawa will put in place to respond to those contained in the new U.S. legislation.
The minister’s reference to new measures is the first indication that the fall update will be more than a simple revision of federal revenue and spending forecasts.
In its letter, the business council said executives are seeking clarity from Ms. Freeland in the update regarding Ottawa’s economic plans.
“In your speech, you promised that the federal government will fast-track ‘the energy and mining projects our allies need to heat their homes and to manufacture electric vehicles.’ Canada’s business leaders welcome this commitment and stand ready to invest the significant sums it will take to deliver on it,” the letter states.
“For major projects to go ahead, however, investors need regulatory predictability and a clear understanding of the ‘rules of the road.’ To that end, I urge you to include in the fall economic statement an unambiguous declaration of government policy in this area and the specific measures you and your cabinet colleagues will take to support it.”
The business group said such a commitment in the update would send an important signal to investors, international allies, and project proponents.
“It would also provide the clarity companies need to support the multibillion-dollar investments that will put Canada on track to meeting its climate commitments,” it states.
The business council represents chief executives and entrepreneurs from over 150 leading companies and is an influential voice on public-policy matters.
Ms. Freeland’s speech last week to the U.S. think tank the Brookings Institution has generated significant attention and debate in Canada, in part because some foreign policy observers said its suggestion of a more aggressive trade posture toward China would be a departure from Canada’s actions to date.
In her speech Wednesday to an Automotive Parts Manufacturers’ Association conference in Windsor, Ms. Freeland listed North American co-operation in areas such as electric vehicles, hydrogen and critical minerals as examples of “friendshoring in action.”
The speech also referenced Wednesday’s inflation numbers, which showed the consumer price index rose 6.9 per cent in September from a year earlier, down from 7 per cent in August.
Ms. Freeland cautioned Canadians that interest-rate hikes to cool inflation will have consequences, including higher mortgage payments and a higher unemployment rate.
The Finance Minister also said the government must run “a tight fiscal ship” and can’t afford to compensate every single Canadian for the higher costs of inflation. Instead, recently announced measures have been targeted at lower-income Canadians.
With respect to fiscal policy, the business council’s letter points out that the higher debt levels built up during the pandemic, combined with higher interest rates, mean the federal government now faces higher debt servicing costs.
A recent report by the Parliamentary Budget Officer said public debt charges are on pace to more than double over the next few years, reaching $47.6-billion in 2027-28.
The letter expresses agreement with Ms. Freeland’s recent comments in support of fiscal prudence and calls on the minister to resist significant new spending and focus on reducing the deficit.
On immigration, the letter says 80 per cent of employers have reported having difficulty finding skilled workers, which is contributing to the delay or cancellation of major projects.
“With an aging work force and a declining labour participation rate, Canada’s future prosperity depends on further increases to the annual number of economic-class applicants who are granted permanent resident status,” the letter states.
The business council recommends that Canada’s immigration targets for 2023-2025 should be equal to 1.2 per cent of the Canadian population, with 65 per cent of new permanent residents entering the country under an economic-class program. That category includes those who are selected for factors such as their ability to meet labour market needs or to start, operate or invest in a business.
Both targets are slightly higher than the government’s current plans, which would welcome 451,000 permanent residents in 2024, of which 267,750 would be from the economic category.
“In support of this goal, we recommend that the fall economic statement provide additional funding to rapidly modernize immigration IT systems, open new processing centres, and increase the ranks of border agents and settlement services personnel,” the council’s letter states.