David Dodge, former governor of the Bank of Canada, recently addressed the House of Commons finance committee, warning that Canadians will face financial challenges and have to make sacrifices in the coming years. He emphasized the need for investment in adaptation, stating that failure to do so will result in a bleak future for the country. Dodge identified four elements of “structural change” that Canada is facing, including an aging population requiring more spending on elderly care, the need for increased spending on climate change adaptation and reducing greenhouse gas emissions, the fragmentation of global markets requiring increased domestic production, and the necessity of significant investment in artificial intelligence and digitalization. However, he also highlighted the high levels of debt and weak savings among individuals and governments. Dodge argued that attempting to finance investments through borrowing will lead to higher prices and interest rates, necessitating reduced spending from governments, businesses, and individuals.
Lisa Raitt, former cabinet minister and co-chair for the advisory council Coalition for a Better Future, echoed Dodge’s concerns, pointing out rising inflation and economic challenges. She emphasized the country’s weak business investment, poor productivity, and contracting economy on a per capita basis. Raitt stressed the need for increased investment in Canada. The finance committee also heard from other economists who echoed similar sentiments. Professor Ian Lee from the Sprott School of Business highlighted Canada’s forgotten lessons of excessive government spending and emphasized the need to focus on economic fundamentals, low productivity, protectionist policies, and barriers to foreign competition. Daniel Brosseau from investment firm Letko Brosseau and Associates discussed the negative impact of Canadian pension funds leaving the country, resulting in reduced investment in the local economy.
Overall, the finance committee is engaging in pre-budget consultations for the 2024 federal budget, taking into account the concerns and warnings expressed by experts regarding Canada’s economic challenges and the need for investment in various sectors.