GOLDSTEIN: Business investment down in Trudeau era: Report – Toronto Sun

Author of the article:

Lorrie Goldstein

Prime Minister Justin Trudeau makes a statement as he visits  Newfoundland and Labrador Premier Andrew Furey at the Confederation Building in St. John's, N.L. on Wednesday, July 28, 2021.
Prime Minister Justin Trudeau makes a statement as he visits Newfoundland and Labrador Premier Andrew Furey at the Confederation Building in St. John’s, N.L. on Wednesday, July 28, 2021. Photo by Andrew Vaughan /The Canadian Press

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The Trudeau government presided over an alarming drop in private sector business investment in Canada in the five years before the COVID-19 pandemic hit in 2020, according to a new study by the Fraser Institute.

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The report by Steven Globerman and Joel Emes says almost half of Canada’s major industries experienced an overall decline in investment during that period, endangering Canada’s international competitiveness, productivity and prosperity.

“From 2015 to 2019, despite the absence of a major recession (as Canada experienced in the early 1990s and 2008-2009), more domestic industries experienced decreases in capital investment than at any time since 1990,” the study says.

“While the oil and gas industry experienced the largest and most high-profile decline in investment (48%), other industries including agriculture, forestry and fishing (19%), utilities (19%) and retail trade (11%) also experienced meaningful declines.”

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It’s not as if the Trudeau government doesn’t know about the problem.

As then finance minister Bill Morneau told CTV’s Evan Solomon in 2018, “if businesses don’t invest to create great jobs, then we won’t have the future that we want in our country.”

Of the 15 major private sector industries surveyed in the report by the fiscally conservative think tank, “Industry-Level Private Sector Capital Expenditures in Canada: 1990-2019”, seven experienced drops in investment from 2014 to 2019, including agriculture; mining, quarrying and oil and gas extraction; utilities; retail trade; administrative services; accommodation and a final category called other services.

Eight had increases, including construction; manufacturing; wholesale trade; transportation; information and cultural industries; finance; professional and scientific services and arts and entertainment.

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However, that ratio of eight sectors gaining investment while seven experienced declines from 2014-2019 was the worst performance in any five-year period going back to 1990-1995,  when 11 of the 15 sectors experienced investment increases, followed by all 15 sectors from 1995-2000, 12 of 15 from 2000- 2005, 11 from 2005-2010 and 13 from 2010- 2014.

The good news is that overall business investment has improved since 2014-2017, when two-thirds of Canada’s major private sector industries experienced investment declines.

The bad news is that in the key category of new investments in machinery, equipment and intellectual property products (such as software), which is most directly linked to productivity and wages, all but three major sectors — manufacturing; information and cultural industries and finance — showed declines from 2014-2019.

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The study says while political debate in Canada focuses mainly on well-publicized declines in investments in the oil and gas sector — which is hampered by a lack of pipeline capacity, meaning these resources have to be sold at a discount — the problem is far more widespread.

“In a troubling trend, a wide range of industries in Canada have experienced a decline in investment, which is bad news for the economy,” Globerman said.

“The country’s recent weak investment performance, especially in machinery and equipment plus intellectual property products, which is so critical to improving productivity, augurs poorly for future productivity growth in Canada’s private sector and underscores the urgency of tax and regulatory reforms to strengthen incentives for investment and entrepreneurship in Canada’s business sector.”

The report warns the Trudeau government, “is seriously underestimating the magnitude of Canada’s competitiveness problem, and that stronger measures should have been taken to improve Canada’s fiscal and regulatory environment for business and investment” including reducing corporate and personal taxes and eliminating regulatory red tape and legal restrictions, particularly for pipelines.

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