Niagara, April 7, 2022 – The Greater Niagara Chamber of Commerce (GNCC) notes that the Government of Canada, reacting to a booming economic rebound, has opted to re-invest in housing, green energy, and other forward-thinking projects and programs. Much of this is wisely targeted at known economic pain points such as housing and supply chains.
Simultaneously, while the era of extraordinary COVID-19 relief is coming to an end, the last five weeks in Ukraine have shown that peace and security cannot be taken for granted. That being the case, heightened defence spending was inevitable, particularly as Canada currently funds its military at a low rate compared to NATO peers.
The Chamber particularly welcomed the 2022 Canadian budget’s focus on housing, a major policy priority for the GNCC. As rents and costs of living go up, wage pressure increases on employers already stressed by labour shortages, supply chain issues, and the lingering effects of the COVID-19 pandemic, while workers are driven to lower-cost housing markets.
“Foreign speculation undoubtedly plays some part in the housing crisis, as does domestic speculation and flipping,” said GNCC CEO Mishka Balsom, “but the true issue is a lack of supply. Canada has the lowest housing stock of any G7 country. Assuming pre-pandemic immigration rates return, Canada would need to build 2.5 million homes within the next four years to hit the G7 average, not the 1.4 million that was promised in the last federal election. We’d need to build at more than three times the pace of the last 20 years. Speeding up construction is welcome, but we wonder if it will be enough.”
While the budget contained significant investment for housing, and for low-energy housing, the bulk of the work will have to be done at the provincial and municipal levels, and the intensified development needed is already encountering significant local opposition.
Pressures for spending are mounting even as public debt grows. Canada’s generous COVID-19 support packages were funded by a greater increase in public debt than any other developed country. A need to invest more in defence will have to be added to existing investment needs in infrastructure, housing, and climate change mitigation.
However, increased spending and increased debt is not a sustainable plan. We have previously been disappointed by promises from governments at all levels that debts can be repaid and budgets balanced simply by growing the economy. Firstly, a growing economy means growing costs for governments in services and infrastructure; secondly, as the last two years have proven, economic growth cannot be counted on.
This being the case, certain tax increases were likely inevitable. This budget aims such increases at high-income-earners in finance and insurance (largely unaffected by the pandemic), while incentivizing growth in small firms and those focused on green energy and carbon reduction.
“A slower phase-out of the small business tax rate was a welcome announcement,” said Balsom. “Hard caps on financial opportunities disincentivize growth; companies are reluctant to grow when the extra revenue or extra employees would render them ineligible for programs or tax savings. Tax policies need to focus not just on maximizing revenue, but on maximizing growth.”
With unemployment projected to remain low, and with supply chains and inflation now the biggest economic challenges, a growth-oriented budget makes sense at this time. Prudent governments have reinvested the rewards of growth in diversification and social programs, and this budget represents a step in that direction.
