Press release: Sustain inclusive growth by reducing housing market risks and overcoming specific skills shortages, says OECD
Canada’s economic growth has been fairly solid since the trough of the recession and is projected to remain so. The super cycle in commodity prices has increased incomes most in resource-rich provinces. House prices and household debt have risen to high levels. Considerable progress towards fiscal sustainability has been made but provinces face long-term challenges. Skills shortages have grown in certain fields and regions, which could limit growth going forward. Environmental sustainability and meeting international targets for reducing greenhouse gas emissions remain challenges.
Monetary policy remains highly accommodative, supporting activity and probably pushing up house prices. Economic slack should be absorbed by mid-2015, contributing to an expected increase in inflation to near 2%. Macro-prudential tightening has moderated growth in household borrowing and reduced the risks of sharp house price declines. Even so, extensive government involvement in mortgage insurance exposes taxpayers to more risk than is necessary for ensuring a liquid and efficient market. Affordability has become a serious challenge for low-income households in some urban areas.
Fiscal sustainability and managing non-renewable resources
The federal government has made considerable progress in reducing its budget deficit and is on track to eliminate the deficit by 2015. Provincial governments have made less progress, have more modest consolidation plans and will have slowly rising debt-to-GDP ratios over the next few years. Rising health-care costs pose a major long-term challenge to provincial governments, despite reforms that slowed growth in the last few years. The increase in commodity prices since 2002 has created wide regional disparities in fiscal capacity, which have only partially been offset by fiscal equalisation transfers.
Skills shortages have increased for skilled tradespersons, especially in Alberta and Saskatchewan, and for Canadian-born people, but not immigrants, with university degrees in certain fields, notably engineering, management and health care. The apprenticeship completion rate was only 50% over 2000-2011, holding back the increase in the supply of skilled tradespersons. Inconsistencies in apprenticeship training and certification requirements across the country impede inter-provincial mobility of apprentices. Information linking fields of study to occupational outcomes has been lacking, limiting the flow of students towards occupations in high demand. Highly-skilled immigrants’ foreign qualifications and work experience have less value in the labour market than domestic credentials.
For further information please contact the Canada Desk at the OECD Economics Department.
The OECD Secretariat's report was prepared by David Carey and Calista Cheung under the supervision of Peter Jarrett. Research and editorial assistance was provided by Françoise Correia.