Reality Check:  Canada’s Economy is Doing Much Better than Most Canadians Think

Contrary to popular opinion, Canada is NOT undergoing a catastrophic economic decline. On the contrary, compared to the economies of our G7 partners, and to our own previous periods of economic setback, (such as 1992 and 2008), we are actually doing surprisingly well.

The fact that most Canadians simply do not believe this can be attributed to two things.  First, the current huge gap between perception and reality has been actively promoted by Conservative leader Pierre Poilievre (“Justin Trudeau has driven the economy into the ditch”[i] ) and his followers on social media. And, second, the Conservatives’ efforts to create widespread concern have been successful in part due to most citizens’ dismal lack of knowledge of economic basics. Several studies have demonstrated that most Canadians are uninterested in economic issues most of the time. Worse still,however, is the fact that when they are asked to speculate on the current situation their guesses are wildly out of line with reality.  [ii]

Take, for example, typical indicators of a country’s economic well-being such as the rate of inflation, interest rates, the unemployment rate, mortgage rates and poverty levels. As Abacus Data’s recent surveys demonstrate so graphically, most Canadians apparently believe all of these figures are now at record highs. Nothing could be further from the truth.

Canada’s inflation rate, for example, is now amongst the lowest in the world and on a par with the US and Japan, the two other G7 countries doing well in this regard, and far below that of the UK. As Claude Lavoie, a former Director General in the Department of Finance has pointed out, our unemployment and poverty rates “are at near record lows” and, despite the pandemic, “income inequality has not increased and is relatively low compared with peer countries.” Moreover, he notes that “the median hourly wage is higher than it was pre-COVID, even after controlling for inflation. And our middle class is among the richest in the world.”[iii]           

For some truly eye-popping historical comparisons, one need only look at the situation in the early 1990’s, when unemployment rates were twice as high as they are now and mortgage rates reached 13.25%  for a five year fixed term, with variable rates as high as 17%. The poverty rate, meanwhile, was a staggering 17.8%, compared with less than 7% today.

This is not to suggest that there are no reasons why Canadians should be concerned about their future. Clearly the decreasing supply of affordable housing is an important issue affecting a significant number of Canadians. At the same time, it is neither a new issue nor one that can be resolved in short order. Both provincial and municipal governments – who as the prime minister pointed out are constitutionally responsible for housing under our federal system of government – have been guilty of neglecting this situation for years, and it will take many years to reverse this trend, even with financial assistance from the federal government.[iv] Yet rather than offer constructive criticism or positive suggestions, Mr. Poilievre has simply, and wrongly, assigned all blame for what he has termed “housing hell” to the Trudeau government. [v] He has also raised false expectations for young Canadians with his videos suggesting almost any thirty-year-old was able to purchase a house in the not too distant past but will never be able to do so now, despite data demonstrating the average age of a homebuyer has increased only 4 years, from 32 to 36, over the past fifty years.[vi]      

At the same time the equally complex issue of food security has emerged as a growing concern for low income Canadians. Here too, however, although prices have risen temporarily due to external issues such as supply chain problems and the war in Ukraine, the real issue is not a dramatic increase in the price of food, especially relative to our peer countries, but rather the inadequate financial assistance provided to low income Canadians such as those on social assistance and disability benefits. And once again these responsibilities fall to provincial governments, all of whom have been accused of failing to increase support in recent years to match the cost of living. As one seminal study by Dalhousie University scholars noted, food prices are demonstrably not the root cause of food insecurity:

With the current focus on increasing food prices, it may be surprising that Canadians spend relatively little on food. According to a 2016 study — the last year for which data is available — Canada was among five countries in the world that spend the least on food.

In 2022, Canadians spent, on average, 11 per cent of their income on food. Those with the highest incomes spent 5.2 per cent on food, while those living with the lowest incomes spent up to 23 per cent of their income on food. That means those with the lowest income most significantly felt the burden of increased food costs.

The percentage of income spent on food has been decreasing since the 1960s. In 1969, Canadians spent 19.6 per cent of their income on food. While food prices have increased due to the pandemic and inflation, food spending among Canadians has been relatively stable since 2010 at between 10 to 11 per cent of their incomes.  [vii]

Meanwhile Mr. Poilievre’s refusal to deal with or even recognize the very real crisis of climate change is perhaps the most important long-term threat to Canadians’ well-being, economic or otherwise. Despite every part of the country having experienced a disastrous range of forest fires, floods and other environmental catastrophes throughout 2023, Mr. Poilievre enters 2024 determined to protect the oil and gas industries and eliminate almost all of the measures the Trudeau government has taken to tackle this global challenge. Most economists believe interest rates, housing prices and the consumer price index will continue to fall in 2024, but no one except Pierre Poilievre believes the effects of climate change will disappear this year. If Canadians are determined to worry, they need to focus on the real threat to their future well-being, a Conservative leader and potential prime minister with his head in the sand.