Economic statement included positive signals in several key areas, but detail and urgency will be key
The federal government’s Fall Economic Statement includes steps in the right direction, but government still needs a solid focus on growth and productivity in the near term. Urgency and detail are the key words.
We are pleased to see commitments to immigration and settlement, skills development, and capacity improvements to regulatory processes. Investments in decarbonizing industry will bring Canada closer to competitiveness with the United States, specifically the Canada Growth Fund and carbon contracts for differences, the tax credits for clean technologies such as nuclear and hydrogen, and a focus on critical minerals—all of these will work to incent investing in Canada. These investments will help Canada be the world’s best supplier of low-carbon energy, materials, and minerals, which aligns closely with the trajectory of Alberta’s economic future.
However, we still need to ensure that we create a pathway from today to tomorrow through an urgent growth and productivity plan—and that includes helping the world with food and energy now.
Canada must work harder to be at full parity with the US in terms of emissions reduction investments—close won’t cut it. Actions such as the share buy-tax move us in the wrong direction and will do little to ensure that investment remains in Canada if our investment climate is not competitive. It is important to recognize that Canada’s deficit is lower, largely because of the contributions of Canada’s resource sector. In getting from today to tomorrow, the government must ensure that those sectors and jobs that contribute so much to the quality of life that Canadians enjoy stay vibrant today while positioning themselves for the future.
Economic statements are always more than just about the fiscal picture, they are often like mini-budgets and show the next policy direction.
We’re pleased to see that Canada’s economic performance and fiscal position are strong than anticipated. The deficit for the current fiscal year is projected to come in at $36 billion, well below the $53 billion expected in Budget 2022.
The improvement in Canada’s bottom line was entirely because of higher-than-expected revenues, including from inflation and energy sector profits. In fact, strong revenues alone would have been enough to cut the deficit almost in half (to $23 billion), but the government chose to increase spending by another $13 billion this year over and above Budget 2022 levels.
Competitiveness with US on Decarbonization
Canada has a major competitiveness challenge. And following the adoption of the US Inflation Reduction Act, we must ensure that we are competitive and incentivizing investment, particularly in the energy and clean tech sectors. Failure to do so means that investment and economic opportunities will pass Canada by.
We were pleased to see some modest progress on improving competitiveness in climate-related investments in Canada. There were promising new details announced that Alberta businesses were looking for, including the fact that carbon contracts for differences and CCUS will be supported under the Canada Growth Fund. Similarly, investment tax credits that support hydrogen production and infrastructure buildouts are welcome.
That said, details on many of these programs were slim. For the most part, Canadians were asked to stay tuned for more information in Budget 2023.
In the spirit of two steps forward and one back, the announcement of a 2% share buyback tax is a firm step in the wrong direction. Alberta energy companies are trying to invest in climate action but struggle to do so in the face of constantly changing federal policies. In effect, it disproportionately penalizes Alberta businesses for not acting because of policy uncertainty of the federal government’s own making.
Regulatory Review Process & Reform
The federal government has also reiterated its commitment to deliver on Canada’s climate goals and targets. Alberta’s business community is supportive of Canada’s 2030 and 2050 climate targets. Canada’s natural resource sector accounts for most of the investment in clean technology, but lengthy regulatory review processes create unnecessary roadblocks to advancing major projects. Even with stable, predictable supportive policies for major decarbonization projects are put into place, Canada’s regulatory review timelines will make the nation’s 2030 and net-zero ambitions unachievable.
The Council is pleased to see this fiscal update recognize the necessity of making it easier for businesses to invest in major projects in Canada. The $1.28 billion provision over six years for increasing the capacity for Canada’s key major project review bodies—the Impact Assessment Agency, the Canadian Nuclear Safety Commission, the Canada Energy Regulator, and the ten other departments that touch on the review process—to improve process bottlenecks and find review efficiencies without sacrificing review stringency.
However, the Fall Economic Statement does not commit to updating or reviewing structural process deficiencies. BCA believes structural changes to regulatory review processes are required to maximize review efficiency and increase predictability. The Council looks forward to providing recommendations to improve the entire scope of Canada’s multijurisdictional review processes in the coming months.
As outlined in a letter detailing Alberta’s priorities, we believe Canada needs to prioritize creating and implementing a long-term strategy for growth that builds a more robust, competitive, innovative, and equitable national economy. We are glad to see the federal government’s plan to put significant focus toward this goal; however, we want to see action, which we look forward to in Budget 2023.
About the Business Council of Alberta. The Business Council of Alberta is a non-partisan, for-purpose organization dedicated to building a better Alberta within a more dynamic Canada. Composed of the chief executives and leading entrepreneurs of the province’s largest enterprises, Council members are proud to represent the majority of Alberta’s private sector investment, job creation, exports, and research and development. The Council is committed to working with leaders and stakeholders across Alberta and Canada in proposing bold and innovative public policy solutions and initiatives that will make life better for Albertans.