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Canadians may know the results of the 2019 federal election, but there are still unanswered questions about the fate of the economy.

The global picture is far from rosy, so what matters now is how well Justin Trudeau’s Liberals handle their minority government and whether they will be ready for a recession, said Christopher Ragan, director of the Max Bell School of Public Policy at McGill University and a former member of the federal economic growth advisory council.

Ragan said he doesn’t doubt that the Liberals will be “more careful and a little bit more thoughtful as they up end negotiating” with other parties. This could possibly lead to “better policy” and “a fairly stable minority” for the next two years, he said, noting that “the other parties aren’t in good enough shape” to push for another election any time soon.

In some post-election reports from Canada’s Big Five banks, a parliamentary alliance with the New Democratic Party was predicted. While policy differences exist between the Liberals and NDP, economists said there are areas of overlap, adding that this isn’t the country’s first experience with a minority government.

From an economic standpoint, Ragan said he’s waiting to see “whether we’re able to get [the Trans Mountain Pipeline] built, whether our current version of climate policy gets locked in and expanded, and how we change the tax system.”

“One of the things that wasn’t talked much about by the candidates was to what extent we should be thinking about the next recession, which is probably around the corner,” Ragain said. “I say that because it’s been 10 years of recovery mode, and it’s been a fairly tepid recovery.”

On the upside, he said, “The economy is probably ready, as long as the government runs small budget deficits — they’re currently a little larger than I think they should be. If the debt-to-GDP ratio continues to fall, then I think we [will] have the flexibility to respond with a fiscal expansion. Monetary policy isn’t completely out of ammunition, but […] the onus will be more on fiscal policy.”

For now, bank economists are predicting modest near-term growth. In a report issued Tuesday, Bank of Montreal predicted GDP growth of 1.5% this year and 1.7% in 2020, spurred by firmer housing and modest fiscal stimulus. A Toronto-Dominion Bank (TD Bank) report discussed the Liberal’s “marginally growth positive” platform that could result in expansion of 1.7% next year and in 2021, followed by 1.8% in 2022 and 2023.

Nonetheless, a key factor to watch is business investment sentiment, said Alex Kotsopoulos, partner at Toronto-based RSM Canada LLP. “Things are a lot different than they were four years ago. The global economy is slowing quite substantially,” he said, which is affecting domestic expansion.

“I will look at what measures the new government is going to put forward to give a boost to small- and medium-sized businesses, which represent a significant portion of economic growth and entrepreneurialism in this country,” Kotsopoulos said.

During the campaign, the Liberals promised to support entrepreneurs launching businesses and expanding online services, in addition to cutting the cost of federal incorporation by 75%. They also said they’d cut corporate taxes in half for businesses that produce zero-emissions technologies.

But these measures may not be enough, based on two surveys released on Tuesday.

The Bank of Canada’s autumn business outlook survey said business confidence has improved compared to earlier this year, but regional results were less positive and overall confidence remains below 2017 and 2018 levels. Separately, a global survey of seniors executives, conducted by U.S.-based Russell Reynolds Associates, found that 96% of respondents expect a recession within 12 months and only 8% feel prepared.

In Kotsopoulos’ view, the government needs to achieve “the right mix” of fiscal stimulus in coming years.

Investing in infrastructure is favoured by the Liberals, he said, adding that “it can provide a boost to the economy and long-term productivity benefits, especially if you invest in projects that are not just shovel-ready but shovel-worthy.” However, “if the economy needs an immediate boost or increase in demand, infrastructure spending isn’t the best way to go,” he added.

What might be more effective, Kotsopoulos said, are measures targeted at businesses and consumers, such as those targeting accelerated capital cost allowances and tax cuts for low- to middle-income Canadians. More broadly, Kotsopoulos will monitor how major projects and issues are handled, including the Trans Mountain expansion project and housing affordability.