Question

You and have applied for and successful won a job as senior policy analyst for the Government of Canada (Privy Council) and you have been well trained to handle all aspects of the job. You will be the “go to person” for the Prime Minister on ways to make the economy run more efficiently and fairly, especially from a social policy perspective. As this is a big job, you have hired a team to help find solutions to the social problems facing the country. You get your first call from the Prime Minister and you are asked to evaluate pressing issues facing the economy and country as a whole. You have been asked to explore four key issues and to shed some light on them from a social policy perspective

Answer 1

The Four key issues in the Canadian Economy are as follows:

1. Trade Wars and Brexit-  Canada is an open economy, dependent on trade, so trade wars add to the worldwide outlook a significant downside risk. The two biggest countries in the world, the United States and China, are also our top two export destinations — and their tit-for-tat tariffs could considerably increase our main consumer markets ' prices (and decrease buying power), placing the prospect of enhanced exports at risk. The United Kingdom is our third largest trading partner, accounting for just over 3% of exports. The financial development of the United Kingdom is already slipping, and a tough Brexit would have a significant impact on its economy and on that of the UK's main trading partners in Europe.

2. Consumer Blues- The phenomenal development of Canada in 2017 was mainly influenced by consumer spending. Low interest rates and warm real estate markets in many areas of the nation at that moment helped attract families to take on more debt and continue to open their purse strings. But the expenditure of families will be much more restricted. Government policies introduced over the previous few years, including taxes on foreign buyers, tighter rules on mortgages and greater interest rates, have achieved what they intended— stop fast appreciation of home prices. Households will not feel the desire to spend on increasing home values, and higher debt costs in 2019 will take a bite out of expenditure. More modest employment and wage growth, coupled with a drop in equity markets, will also hurt household spending, but by how much remains to be seen.

3. Private Investment Lagging- Corporations have recognized uncertainty about U.S. market access, more stringent environmental regulations, lower tax competitiveness relative to the U.S., and absence of skilled labor as significant variables that hurt investment plans. A fresh trade agreement with the United States and Mexico and the latest move by the federal government to accelerate capital expenses should assist offset some issues.

4. U.S. Disconnect- Low rates of investment imply that some Canadian companies are not capable of meeting export demand. Strong U.S. growth has not supported non-energy exports despite a favorable exchange rate — adjusted for inflation, they have not risen in three years. The typically powerful U.S. economy-Canadian exports relationship is disconnected. The outlook for exports will depend on Canadian firms ' ability to improve productive capacity over the next few years, which involves investment.