Another example of how even ‘growth’ in Canada’s economy has been largely illusory and unsustainable since it’s not based on real productivity.
With talk of a looming recession growing louder, the head of economics at Macquarie Group says a recession in North America would hit Canada Canada harder than the United States:
“When [Canada] has recessions, the lion’s share of the weakness in gross domestic product tends to come from residential investment,” said David Doyle.
The issue is Canada’s overreliance on the housing market, which comprises 10% of Canada’s GDP growth, compared to about 5% in the United States:
“The effects of Bank of Canada rate hikes have already begun to cool housing activity. National home sales and prices fell in May compared to the month prior, according to the Canadian Real Estate Association.
“We think the effect of the recession will be much more severe in terms of the drawdown on GDP growth, in terms of how high unemployment will rise. That will be much more severe in Canada than what we foresee in the United States,” he said.
“In the U.S., we’re looking to three to four quarters of softness or contraction in GDP. In Canada, it might be a quarter or two longer than that,” he added.”
Doyle says he expects both Canada and the US to go into a recession next year.
Illusory growth
Much of Canada’s supposed economic growth has been an illusion, driven by unsustainable factors that sow the seeds of their own reversal.
For example, massive borrowing and government spending can give the appearance of growth in the short-term, but the rise in debt and inflationary consequences end up leading to economic downturns and long-term damage.
Similarily, relying upon population growth and an out-of-control housing market generates some economic activity, but is not a sustainable way to actually grow the economy, since more and more people are priced out of home ownership.
The fact is that Canada has a serious productivity problem.
Our per capita GDP growth lags nations similar to ours, meaning that we are falling further and further behind.
It’s no surprise then that in the absence of productivity the only way we seem to generate ‘growth’ is through borrowing, inflation, and a housing bubble.
Those are all signs of an economy that is no longer actually improving, but is merely leeching off the productivity of the past before heading into the abyss.
And, not only would Canada be hit hard by a recession, but our ‘growth’ was already lagging behind the US and many comparable nations. This means we will fall further from a lower level.
This is yet more evidence of how profoundly the high-tax, anti-productivity, anti-growth policies of the Liberals have failed our country.
Even when the Liberals are finally defeated, we will be digging ourselves out of this hole for a very long time.
Spencer Fernando
Photo – YouTube
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