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Canada

Economic Survey Canada 2004

 

Executive summary

The OECD assessment and recommendations on the main economic challenges faced by Canada are available by clicking on each chapter heading below.

Key challenges

Canada’s economic performance has remained robust overall, despite a sluggish rebound in 2003 from the earlier global slowdown. The macroeconomic framework established in the 1990s has worked well and places the country in the enviable position of being able to focus its attention primarily on addressing longer term concerns. This chapter first considers Canada’s recent macroeconomic performance and the latest and potential developments concerning its place in an increasingly globalised world. The chapter then turns to the two key challenges facing Canada in coming years, which will in turn provide some pointers towards priorities for the new government to consider. The first one would be to identify ways of continuing to improve living standards — despite demographic patterns that will become less favourable through time — while maintaining the social values that are important to Canadians: productivity growth is the key element although total hours worked may contribute. The second challenge will be to reinforce the sustainability of public finances and to ensure that the exemplary record of fiscal consolidation over the past decade is transformed into a more robust framework for dealing with the ageing related pressures that will emerge, particularly for health care.

Product market competition and macroeconomic performance

This chapter assesses what role product market competition and the policies that impact upon competition may have played in the performance of the Canadian economy over the past decade. The main links between stronger competition and macroeconomic performance are reviewed in the first section of this chapter, while the second section describes the competition legislation framework and recent proposed changes to it. The third section discusses regulatory policies impacting upon competitive conditions in the economy, in particular restrictions on foreign direct investment and inter provincial trade. Regulation, the intensity of competitive forces and recent reforms are then analysed for a wide range of non manufacturing network sectors: telecommunications, broadcasting, electricity, natural gas and airlines. A concluding section draws on the analysis to recommend policies that could further improve product market competition and boost economic performance.

Of special interest: Electricity Sector (pdf file)
See also ECO Working Paper 421: Product market competition and economic performance in Canada

Policies for enhancing productivity and labour utilisation

A key economic challenge for Canada is to raise living standards. This chapter first considers policies that would stimulate capital “deepening” with tax rules clearly playing a central role. Next, the discussion turns to ways of boosting productivity growth by adding to the stock of human capital and in particular considers the benefits that would be obtained by improving literacy. Stimulating innovation is briefly discussed along with the government’s Innovation Strategy. The chapter then turns to three key areas that are important for raising total hours worked. First, the reliance of certain workers and firms on the regular (unemployment) benefits within the Employment Insurance programme is examined. Second, the “welfare wall” and disincentives for additional hours are considered, with a particular focus on the effect on high effective marginal tax rates of the introduction of the National Child Benefit Supplement for low income families. Third, options are considered for increasing flexibility for those older workers who wish to remain in the workforce longer but are financially discouraged from doing so.

Of special interest: Employment insurance (pdf file)

Reinforcing the long-term sustainability of public finances

Demographic forces and rising health care spending in Canada could endanger the sustainability of public finances in the long term and a key challenge for the Canadian economy is to ensure fiscal sustainability across all levels of government. Against this background, this chapter first looks at budgeting procedures and highlights the importance of incorporating more medium term elements into the current framework. This would allow a better allocation of resources and make it easier to assess whether current fiscal objectives are sufficient to prepare for the future. Second, the chapter considers health care where there are a number of weaknesses, including shortages of medical staff and high tech equipment, but where productivity also appears insufficient. A number of changes to the institutional framework are examined that would enhance efficiency and help contain costs in this sector.

Of special interest:  Institutional changes to health care system (pdf file)

A printer-friendly Policy Brief  (in PDF format) may also be downloaded. The Policy Brief contains the executive summary and the OECD assessment and recommendations, but does not necessarily include all of the charts available from the above pages.

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The complete edition of the OECD Economic Survey for Canada is available from:

 

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