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A significant public infrastructure initiative would result in a substantial short-term boost to the economy, along with longer-term benefits for Canadians through a rise in gross domestic product, a new report by the Centre for Spatial Economics shows.
The report, released Monday and commissioned by the Broadbent Institute, an Ottawa-based left-leaning think tank, estimated the short-term and long-run economic impact of a national five-year, $50-billion public infrastructure program funded equally by the federal and provincial governments. The study models the economic benefits of a plan to invest $10-billion a year for five years in basic municipal infrastructure such as roads, transit, water and waste water management.
The results of the study show that in the short term, between 2015 and 2019, investing in Canada's public infrastructure would boost GDP by $1.43 for every dollar spent and create 9.4 jobs per million dollars spent. Spending would boost employment between 81,000 and 88,000 jobs with about half of the new jobs being in construction. In the short term, provincial revenues raised per dollar spent are highest in Quebec at 72 cents, followed by British Columbia at 57 cents and Nova Scotia at 46 cents. The greatest impact on real GDP growth is seen in Quebec, with an average increase of more than 1 per cent, and B.C. with growth between 0.8 and 0.9 per cent. For all of Canada, the average annual increase was 0.7 per cent.
The benefits of the public infrastructure spending are also substantial in the long run. From 2020 to 2040, the spending initiative would generate a return on investment to Canadians as high as $3.83 per dollar spent. The private sector also benefits with private sector investment rising as much as 34 cents per dollar spent in the short term and by up to $1 per dollar spent in the long run. Labour productivity increases by between 0.3 and 0.5 per cent and workers earn higher real wages – up on average 0.4 to 0.6 per cent a year relative to the economy without the infrastructure spending.
"These results show why a robust public infrastructure program just makes sense, and I'm encouraged the opposition parties are committed to investing," Rick Smith, executive director of the Broadbent Institute, said in a press release.
"This is about Canada's long-term prosperity. It will enhance our competitiveness, boost productivity and raise real wages, while making a significant dent in Canada's $123-billion infrastructure deficit."
The benefits to the Canadian economy, the report said, would be "realized without significant long-term fiscal consequences to federal or provincial governments." The change in the average annual deficit-to-GDP ratio would lie between a rise of 0.04 per cent and a decline of 0.02 per cent for the federal government and between a rise of 0.08 per cent and a fall of 0.04 per cent for provincial governments.
Due to these numbers, the report suggests that the overall long-term impact at both the provincial and federal level is likely to be small, maybe even positive.
"The most striking conclusion of the study is how clearly it shows that investing in public infrastructure can help secure our long-term prosperity," said economist and study author Robin Somerville. Public infrastructure, he said, has been neglected for the past few decades and municipal governments are overwhelmed with crumbling infrastructure and lack of funding. According to the report, Canada's aging infrastructure could be "an important contributing factor to our lacklustre productivity gains."
"We've collectively taken our eyes off the ball with the state of our bridges to our detriment," Mr. Somerville said.
The report also serves as a cautionary tale. "Allowing our public infrastructure to decay imposes costs at least equal but opposite to the benefits estimated in this study," it says. Because of this, the findings are something that should be taken into consideration regardless of party stripe.
"Bridges and sewers may run east or west but they're not left-wing or right-wing issues," he says. "They're either a good idea and needed or they're not. If they're a good idea, they should be done regardless of the colour of government in power."