Saturday July 11, 2015
'Overall strength of our economy' should be a concern, says Kevin Page
more stories from this episode
Although Canada is in a likely "technical recession" — defined as two consecutive quarters of negative growth — it's a recession that is contained, says former budget watchdog Kevin Page.
"In the current context, if you look at the growth numbers, the recession is effectively in the goods sector, it's in the oil industry, it's weak growth in manufacturing, weak growth in construction," said Page in an interview on CBC Radio's The House.
"It's quite contained. There's still lots of growth in the service sector."
But don't get too optimistic, cautioned Page, who served as Canada's first Parliamentary Budget Officer from 2008-2013.
The Canadian economy lost 6,400 jobs in June as gains in full-time work were offset by losses of part-time jobs, according to Statistics Canada.
The jobless rate stayed steady at 6.8 per cent, the same level it has been at since February. It was a better showing than what a consensus of economists were expecting, which was a loss of about 10,000 positions, but Page said the pattern remains one of shrinking growth.
"For the second quarter we had net job creation of more than 30,000, but if you look at the trend in June we actually declined," he said.
"So if you look at the job picture, it's gotten progressively weaker through the summer. I think that would be a concern for the government and a concern for the overall strength of our economy."
"The economy's weak, you can't deny that. It will be pretty hard for Minister (of Finance Joe) Oliver to keep that line that we're not in a technical recession," Page added.
The politics behind the "R" word
Oliver had a different view of the new jobs data, focusing on the overall picture of 96,000 net new full-time jobs created since the beginning of 2015.
"The IMF confirmed what I and numerous independent analysts have been saying – the Canadian economy will grow this year," he said in a press release Friday.
Earlier this week, the International Monetary Fund slashed its outlook for the Canadian economy from its April forecast of 2.2 per cent growth to just 1.5 per cent.
Oliver has been adamant that Canada is not in a recession and that the country will see overall growth in 2015, ending the year with a $1.4 billion surplus.
But the "R" word — recession — remains a dirty word for politicians, something Page said he doesn't understand.
"I think the government had a similar difficulty back in 2008, right after an election where they said there'd be no recession and we wouldn't run deficits," he said.
"They had a hard time changing the tone. It sounds a little similar to me, that even after four months of declining growth, they have a hard time admitting that basically we're likely going to have two quarters of decline."
Page said there is room in the Canadian economy to run a small deficit.
"In the context of an economy that's $2 trillion dollars, and outstanding debt in the neighbourhood of more than $500 billion, a few billion dollars one way or another is not an issue," he said. "To put this in more of a political context, there's lots of fiscal room to maneuver and even generate some small deficits for a short period of time."
Page hopes the current focus on the slowing economy spurs a wider debate on Canada's fiscal future.
"Coming out of the 2008 financial crisis, we've been kind of stuck with modest, moderate growth," he said. "I think there is an issue about the resiliency of our economy. Do we want to make sure we have more of a diversified economy? What are the investments we need to ensure that? I think that's part of a broader policy discussion."
Conservative fiscal record 'deserves credit', says ex-PBO
When it comes to the Conservatives' fiscal record, Page said the government "deserves credit" but that greater public and private sector investment in infrastructure is needed.
"We're an economy about to get older in terms of aging demographics," he said. "We're going to need to get investment, and investment's gone nowhere."
"Growth in the future is going to be more and more in terms of ideas. We're going to have to figure out ways to be more innovative, to create new businesses," Page added.
That doesn't always mean the priority should necessarily be on balanced budgets, he said.
"Fiscal policy is certainly about balancing the books, but it's also about, do we have the allocations that we need to have in terms of spending and revenues that promote growth?" he said.
"This is a government that has been very secretive about its austerity programs, and I think a future government is going to have to look at, do we have the resources to make sure we're still getting cheques going out to seniors, we're taking care of meat inspectors, we're taking care of the Coast Guard, veterans."