Here's one issue Canada’s new federal minority Liberal government can’t afford to compromise on: the economy, upon which rides pretty much every political promise made yesterday and everything party leaders say they want to get done tomorrow.
Productivity is a fundamental driver of that fiscal engine. But the news on that front for Canada is mediocre at best.
As the C.D. Howe Institute pointed out in a recent commentary, Canada’s productivity growth has lagged behind its peer countries for the past 15 years.
Justin Trudeau’s Liberals and whichever federal party they co-opt in Canada’s new compromise coalition need to provide the regulatory environment to eliminate the country’s chronic competition and innovation deficit.
Solutions are at hand, but the leadership they require is not.
For example, C.D. Howe points out that Canada is last among its Organization for Economic Co-operation and Development counterparts in small-business lending as a share of total business lending.
The reasons for that are many, but among them, according to C.D. Howe, is Canada Mortgage and Housing Corp.’s (CMHC) 100% insurance for residential mortgage lending, which makes it risk-free for lenders. Lending to small businesses is not similarly backed and therefore not similarly risk-free.
Why not then, as C.D. Howe report authors recommend, scale CMHC insurance for residential mortgages based on mortgage borrowers’ credit worthiness?
While we are at it, why not improve access to capital for small businesses and craft financial services sector regulation to increase innovation and leverage the growing financial technology expertise being developed in places like B.C. so that the country can leapfrog other jurisdictions in the burgeoning opportunities offered by such fintech advances as blockchain?
Action from Ottawa on these and other pressing economic issues could help dispel the fears that all businesses across the country can expect from the federal government for the next four years will be stagnation, indecision and party politics.
