OECD tells Canada to allow foreign ownership in airlines, telecom and broadcasting

Canada should open up its airline, broadcasting and telecom industries to foreign ownership to push down prices, the Organization for Economic Co-operation and Development says in a report released Wednesday.

Group warns that Ottawa should do more to cool housing market in Toronto and Vancouver

Foreign investment in Canada's air travel industry could bring down prices for consumers, the OECD says. (Brent Lewin/Bloomberg)

Canada should open up its airline, broadcasting and telecom industries to foreign ownership to push down prices, the Organization for Economic Co-operation and Development says in a report released Wednesday.

In its latest forecast for Canada's economy, the group of wealthy nations recommends that Canada loosen its restrictive rules forbidding foreign entities from owning a controlling interest in Canadian companies that are major players in any of those sectors.

Doing so "would sharpen competitive pressures, raise productivity and reduce prices for consumers," the OECD says.

Those measures would have the added benefit of disproportionately helping lower- and middle-income households, something that would help stimulate the economy overall, the report says.

For the country as a whole, the OECD is slightly less optimistic about Canada's prospects than it was in its last forecast in the fall. The OECD now says Canada's gross domestic product will grow by 1.7 per cent this year and 2.2 per cent in 2017. That's down from its November estimate of 2.0 per cent growth in Canada's GDP in 2016 and 2.3 per cent in 2017.

The group does say, however, that the worst of the oil crisis is over, and activity in that sector will be higher in the future.

"Business investment in the oil and gas sector continues to fall sharply — it is likely to be about 60 per cent below its 2014 level in 2016 — but should be a smaller drag on growth thereafter," the OECD says.

The group also says Canada needs to tear down trade barriers between provinces, and overhaul power generation and distribution. "In the electricity sector, developing more east-west connections where economic and allowing competition in generation and retail distribution would also lower prices," the OECD says.

Warnings on housing market

Finally, the group says Ottawa needs to do more to cool down hot housing markets in Toronto and Vancouver, although it declines to say specifically what it thinks should be done.

Ottawa has moved several times in recent years to cool down the housing market by tinkering with CMHC rules. But interest rates remain at rock bottom lows, which has prompted reckless borrowing in some markets.

Toronto and Vancouver alone make up almost a third of Canada's entire housing market, so problems there can disrupt the entire economy. "In relation to household incomes, both house prices and household debt are high. Macroprudential measures have been strengthened recently, but should be tightened further and targeted regionally," the OECD says.


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