Skip to main content
The Globe and Mail
Get full access to globeandmail.com
Support quality journalism
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
The Globe and Mail
Support quality journalism
Get full access to globeandmail.com
Globe and Mail website displayed on various devices
Just$1.99
per week
for the first 24 weeks

var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){console.log("scroll");var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))}pencilInit(".js-sub-pencil",!1);

These are stories Report on Business followed this week.

Follow Michael Babad and The Globe's Business Briefing on Twitter.

Capital Economics worries that some Canadian provinces are leaning toward the type of austerity measures that smacked parts of Europe.

Story continues below advertisement

Well, one, in particular. Are you listening, Alberta?

"Politicians think they're doing the good thing, the responsible thing," David Madani, the group's Canada economist, said in an interview.

But politicians "basically need a lesson in history," Mr. Madani added, which is why much of the world is in the mess that it's in.

Mr. Madani pointed specifically at Alberta, and "a little bit" Quebec, and what he expects to see from some of the provinces yet to unveil their budgets.

Alberta did not go all that heavy on restraint, but it piled on the increases to fees and taxes in the wake of the oil shock.

Mr. Madani believes that now is the time for government stimulus, not austerity, particularly given that the Bank of Canada is running out of tools, though he still believes the central bank will slash its benchmark rate to just 0.25 per cent by the end of this year.

"More worryingly, following the lead of other provincial governments, Alberta is attempting to offset the decline in oil-related revenues by hiking taxes and cutting spending," he said separately in a recent report.

Story continues below advertisement

"This is the sort of foolish fiscal austerity that backfired so badly in the euro zone."

In his report this week, Mr. Madani admitted that the expects "fairly modest" fiscal tightening from Canada's provinces.

"But at a time when private demand is falling, public budgets should be fulfilling their role as an automatic stabilizer, with deficits allowed to widen naturally," he said.

"The fiscal austerity being planned is the sort of mistake that proved so costly in the euro zone."

This week, the latest province to act, Nova Scotia, forecast a small deficit of about $98-million for fiscal 2015-2016, though a rebound a year later.

Spending will rise at a modest pace of less than 1 per cent, more than 300 jobs will be slashed, and non-union employees will suffer a wage freeze for three years.

Story continues below advertisement

"This budget comes with a dose of spending restraint and, while only a few new revenue measures were announced today (netting out to roughly a $16-million increase for FY 15/16), more meaningful taxation reform could be coming in the year ahead," said senior economist Robert Kavcic of BMO Nesbitt Burns, citing recommendations for tax changes from a review late last year.

"On the tax side, the overriding message is that consumption taxes should increase (in part through a broadening of the tax base), while income taxes should be simplified and reduced."

Six provinces have now unveiled their budgets, and "we're seeing a little bit of everything (except tax cuts – at least for this year)," Mr. Kavcic said in a separate report.

"Note that of the six to report so far, half are in deficit while the rest are in surplus," he added.

"And, three are expected to see their balance improve while three see it deteriorating. Of the four remaining, all are likely to be in deficit this fiscal year."

Those four are Ontario, Manitoba, Prince Edward Island and Newfoundland and Labrador.

Story continues below advertisement

We'll also get the federal budget on April 21.

Mr. Madani noted that austerity is a global trend, and not unique to Canada.

He added that there's now "overdependence" on monetary policy – the world's central banks have scrambled to cut interest rates – rather than on fiscal policy.

In certain cases, such restraint may be the right avenue. But not in the case of Alberta, which came into the oil shock in a "very strong" position.

Federal Finance Minister Joe Oliver met Thursday with several private sector economists in the run-up to his budget, which he has pledged to balance, and was told to expect a modest showing this year.

"The economists noted that the sharp decline in global crude oil prices and weak global economy were affecting Canada's economy," the Finance Department said.

Story continues below advertisement

"However, they also noted that Canada's underlying economic fundamentals remain strong, and that they expect real gross domestic product (GDP) growth to average about 2 per cent for 2015 as a whole."

Mr. Madani, by the way, has a view of the Canadian economy that is bleaker than many of his counterparts.

He believes the economy will expand by 1.5 per cent this year and just 1 per cent in 2016.

And in a particularly troubling sign, he sees the unemployment rate jumping above 7 per cent in the second half of this year, and holding there throughout all of 2016.

The week in Business Briefing

The week's top business videos

Story continues below advertisement

The week in Streetwise (for subscribers)

The week in Inside the Market (for subscribers)

The week in ROB Insight (for subscribers)

The week's top news

The week's must-reads

Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies