Matthew Lau: Don’t believe Freeland when she says her ‘economic plan is working’

When the Bank of Canada cut interest rates last week, Finance Minister Chrystia Freeland said that it “shows that our economic plan is working.” But the fact is that real GDP per capita has declined for seven of the last eight quarters, shrinking cumulative growth since Prime Minister Justin Trudeau took office to a mere 0.6 per cent, versus a robust 16.4 per cent increase in the United States over the same time period.

Put another way, economic performance under Trudeau is so bad that if Canada tracked with the United States since he took office, we would be 16 per cent richer today. That the Bank of Canada cut interest rates last week does not suggest the Trudeau government’s economic plan is working. It is neither here nor there. Freeland might as well have declared that the government’s economic plan must be working because she ate an unusually large breakfast that morning.

If you ask most entrepreneurs and investors whether the Liberals’ economic plan is working, the answer would most certainly be a resounding “no.” In the second quarter of 2024, real business investment per capita was down five per cent year-over-year, and down more than 15 per cent since the third quarter of 2015. Even worse, that decline in business investment is before the effects of the Trudeau government’s recent capital gains tax increase, which kicked in near the end of June.

The Liberals have suggested that tax hike will not have any negative economic consequences except to the super-rich, but their claims about the tax hike are as error-filled as their claims about general economic performance. When the tax hike came into effect, Justice Minister Arif Virani released an “explainer” video that he later had to delete after Conservative MPs Michelle Rempel Garner and Philip Lawrence pointed out a bunch of errors.

Just as Canadian entrepreneurs and investors clearly don’t have confidence in the Trudeau government’s economic plan, so too can Canadian consumers see that the government’s plan is failing. While annual inflation has now moderated to less than three per cent, this does not undo the rapid increase in consumer prices over the past few years. The Consumer Price Index is today about 11 per cent higher than what it would have been if, since 2021, it had increased at the same rate as the previous decade’s trend line.

In addition to worsening unaffordability, in an Abacus Data poll in March, 71 per cent of Canadians said their household debt is rising, 65 per cent believed the economic recovery would be slow, 52 per cent said their financial stability is insecure and 74 per cent believed housing affordability will worsen this year. If the Liberals’ “economic plan is working,” as Freeland claims, Canadians aren’t feeling it.

To be fair, while the Trudeau government’s economic plan is failing miserably overall, it is actually working splendidly for one segment of the population that Freeland is in constant contact with: the federal public service. From 2015 to 2024, employment in federal departments and agencies increased 43 per cent, versus a measly 12 per cent increase in private-sector and self-employment.

Notably, the headcount at the Canada Revenue Agency increased 48 per cent to over 59,000, and the workforce at Employment and Social Development Canada increased 80 per cent to over 39,000. So while private-sector employment stagnates, the headcount at the federal agency that taxes private-sector workers increased at four times the private sector’s rate, and the headcount at the federal department that regulates and otherwise centrally plans private-sector employment has grown by over seven times the private sector’s rate.

Is it any wonder Canada has a productivity crisis? In fact, clearly contradicting of Freeland’s claim that “our economic plan is working,” two weeks ago, Treasury Board President Anita Anand admitted Canada was experiencing low productivity levels and announced the creation of a federal working group to fix the problem.

Unfortunately, the federal government has not been a model of productivity and efficiency: it missed its own deadline for online passport renewals, Canada Post lost $748 million in 2023 (its sixth consecutive annual loss) and last week, over 200 Via Rail passengers were stranded without food, water and working toilets for 10 hours due to mechanical failures.

So while Freeland claims the government’s economic plan is working, it is very clearly not working. Indeed, a poll earlier this year found that 70 per cent of Canadians believe “everything is broken in the country right now” — kind of like a federal Crown corporation’s train stuck in the middle of nowhere for 10 hours.

National Post