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Good morning,

Canada’s economy has been operating near its potential for more than a year and inflation is on target, according to a recent year-end speech by Bank of Canada Governor Stephen Poloz. The unemployment rate is also at its lowest in decades but Mr. Poloz said the central bank’s forecasts expect a “moderation” in economic growth, which “would only bring us to a sustainable growth track and would not be cause for concern.” Canadians are also expecting the economy to slow down, according to a new Nanos poll for The Globe and Mail. More than half of Canadians surveyed think that the economy will either somewhat worsen or worsen over the course of 2019, a federal election year. Seventeen per cent of those polled expect the economy to worsen and another 38 per cent expect the economy to somewhat worsen compared to 35 per cent who think it will either improve or somewhat improve. Voters’ expectations of what the economy will do during an election year should impact political debate during the campaign, according to pollster Nik Nanos. “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. The survey of 1,000 people was conducted between Nov. 30 and Dec. 5 and has a margin of error of 3.1 percentage points, 19 times out of 20.

This is the daily Politics Briefing newsletter, written by Mayaz Alam in Toronto while Chris Hannay is on vacation. It is exclusively available only to our digital subscribers. Have any feedback? Let us know what you think.

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TODAY’S HEADLINES

Parliamentarians won’t be returning to Centre Block for at least another decade. As the House of Commons and Senate move to their new homes, procedural questions remain about how Parliament will function once the two houses will be in different buildings. Speeches from the throne and royal assent ceremonies require considerable movement of MPs, Senators, and staff, who will now be separated by three city blocks.

David Ossip wants to find a made-in-Canada solution to the federal government’s troubled Phoenix payroll system, which has been marred by failures since it launched in February of 2016. The CEO of Ceridian is being unusually public about his company’s efforts to win the bid to replace Phoenix.

Now that an electoral reform referendum has failed in British Columbia for the third time in 13 years, Quebec and Prince Edward Island will likely become the new sites of debate on the issue. Quebec Premier François Legault campaigned on electoral reform, while PEI is expected to have a referendum of its own next fall.

It’s been nearly a year since Saskatchewan Premier Scott Moe won the leadership race to replace Brad Wall. Mr. Moe’s tenure in office has been defined by his staunch opposition to Ottawa’s carbon tax.

Municipalities in Alberta and Saskatchewan are staring at revenue shortfalls after some energy firms in the oil patch have stopped paying taxes. According to municipal and bankruptcy documents, the loss of revenue is estimated to be in the tens of millions of dollars.

Robert Lloyd Schellenberg, a Canadian in China, will be tried on charges of drug smuggling in Dalian on Saturday, according to a Chinese government-run news portal. The news could further strain the relationship between Canada and China, which has soured after China detained two Canadians following the arrest of Huawei’s CFO in Vancouver.

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Toronto Mayor John Tory is pledging “steady government” moving forward after a tumultuous year that saw the election of Doug Ford and a municipal election that was influenced by the provincial government’s decision to drastically cut the number of seats in City Council. Mr. Tory sat down with The Globe’s city hall reporter Jeff Gray to talk about the year that was and what he expects in 2019.

The White House and Democrats in Congress see no deal to end the partial federal government shutdown in the U.S. Around 420,000 workers are considered essential and are working unpaid and roughly 380,000 more have been furloughed.

China and the U.S. are planning more direct talks in the new year in an effort to resolve the ongoing trade war between the world’s two biggest economies.

U.S. President Donald Trump defended his decision to withdraw troops from Syria during a surprise visit to Iraq yesterday. The trip to al-Asad Airbase was his first to a combat zone since becoming president. The decision to withdraw soldiers led to the resignations of the Defence Secretary and the U.S. envoy to the allied coalition fighting against Islamic State.

European Commissioner Gunther Oettinger raised the possibility that Britain will vote for a Brexit agreement next month, weeks after Prime Minister Theresa May delayed a vote in Parliament because she was expected to lose handily.

And Estonia is on its path to becoming a completely digital government in an effort to cut down on red tape, boost transparency, and encourage growth.

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Debra Soh (The Globe and Mail) on political disagreements with family during the holidays: “I’m a big fan of keeping things short and sweet at such social events and family gatherings, or skipping get-togethers that are likely going to get contentious. In the event that this is out of your control, you can go in and resolutely refrain from talking about politics. Even if someone feels the need to go there, it doesn’t mean the conversation is destined to head south. You can change the subject and physically remove yourself, even temporarily, from the conversation.”

Globe and Mail Editorial Board on deficits: “The notion that federal deficits are bad because they impose burdensome costs on future generations – rather than because of contemporary interest payments or a general aversion to big government – is a familiar conservative idea. It’s become a stock line for the leader of the Opposition. And though it has the feel of a talking point now, the thought was fresh and interesting once. It’s based on a perfectly sound principle: that the living owe something to those not yet born.”

Frank Giustra (The Globe and Mail) on China and Canada: “The unjustified detention of my countrymen hurts China’s global stature and sends a destructive signal to everyone who wants to build bridges. It will discourage academics, members of the business community and others from visiting and engaging with the country, impacting China’s appeal for wider investment and international engagement. And it strains the long-standing friendship between our two countries, nurtured by Canada for decades – often at times when others were ostracizing China.”

Dan Gardner (The Globe and Mail) on climate change: “Why aren’t we more concerned about climate change? By ‘we,’ I mean, of course, most Canadians. There are some who are so concerned that they despair and lose sleep over climate change. But most of us? Polls show we accept that climate change is real and threatening. And we tell pollsters we are truly, deeply worried.”

Michèle Biss (Policy Options) on poverty: “It is laudable for the government to seek a tool that will allow us to measure where we are, where we’ve come from and where we are going as we work to meet the United Nations Sustainable Development Goal of eradicating poverty by 2030. But for millions of people in Canada, the wrong choice of methodology could mean the difference between life and death. It is vital that in our work to address poverty in Canada, we don’t set aside the poverty experience. Every quantitative measurement must be contextualized by the real, lived experience of people who know what poverty is like first-hand. Fixing the market basket measure is our opportunity to get this right.”

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