Is Bill Morneau whistling in the dark with his assertion that Canada is not in recession, nor is it heading into one? Probably not.
Granted, stellar economists like David Rosenberg warn that Canada is awfully close to tipping into recession, and while Rosenberg is something of a perma-bear, his bearish forecasts have more often than not been proven right.
Granted also that it’s part of Morneau’s job as federal finance minister to talk up the economy and to concede that a recession looms or is upon us only when that fact is starkly evident.
Asked after delivering his budget last week about those who fear a recession, Morneau said: “They would be incorrect. That would be technically wrong and certainly not in line with our expectations.”
What Morneau didn’t allow is that negative GDP growth is a distinct possibility in the second quarter. GDP growth in recent months, dating from late last year, has been miserably low, dipping at times to 0.1 per cent. That sure looks like an economy flirting with recession.
But the federal finance ministry, the Bank of Canada and the consensus of economic forecasters believe that GDP will pick up considerably in the second half — enough, perhaps, to justify Morneau’s projection of 1.8 per cent GDP growth for the year as a whole.
What that means for investors, notably those betting on the loonie, is that GDP growth in the second half of 2019 might actually be stronger than 1.8 per cent, itself a decent performance in a world of volatile factors such as trade wars, global political instability and uncertainly in the oil markets, to make up for a weak first half of the year.
SNC-Lavalin is overplaying its hand
In a round of media appearances last week, Neil Bruce, CEO of SNC-Lavalin Group Inc., the Montreal-based engineering and construction giant, suggested that the jobs of his 9,000 Canadian employees are in jeopardy. That his firm is threatened with foreign takeover. And that SNC-Lavalin might have to relocate offshore.
Those grim spectres arise from SNC-Lavalin’s inability to obtain an out-of-court settlement on charges of alleged fraud and bribery dating back several years. If a criminal trial of the firm ended in a conviction, SNC-Lavalin would be disqualified from billions of dollars in federal contracts.
As it happens, SNC-Lavalin failed to ’fess up to unethical conduct at the firm, a requirement of companies seeking a deferred prosecution agreement (DPA) in the countries that offer them. The firm’s talented Canadian employees would be snapped up by rival firms if the company hit the wall.
And SNC-Lavalin won’t leave Montreal. Quebec has said it will buy the firm if it is threatened by foreign takeover, with a big assist from the Caisse de dépôt et placement du Québec, one of the world’s biggest sovereign wealth funds.
Bruce reports that his 9,000 Canadian employees are “bitter.” We’re not sure on that, since Bruce might not have spoken with all of them. Is he certain that their bitterness is directed at Ottawa, and not at the sewer-rat ethics of earlier SNC-Lavalin management that got the firm into this tight corner?
Though he insists he is now wholly occupied with preparing for a criminal trial, Bruce in fact is still seeking his elusive out-of-court settlement.
It’s a certainty that the more he traffics in threats the less likely he is to obtain one.
Rescuing Canada’s free press
Watch for significant changes in the detailed plan for assisting Canada’s troubled news industry unveiled in last week’s federal budget.
While in the main laudable, the plan burdens Canadian taxpayers with the entire $595 million cost of the assistance it provides, rather than imposing a tax on Facebook, Google and the other digital platforms that have hoovered up most of the ad revenue that for generations subsidized traditional private-sector news gathering.
The European Union is contemplating the breakup of the Facebook-Google duopoly and taxing their successor firms to support the traditional news outlets the digital juggernauts have starved of revenue.
As well, private broadcasters are disqualified from the biggest part of Ottawa’s plan, a 25 per cent tax credit to subsidize the cost of a media group’s news-gathering personnel.
If private-sector broadcasters can raise their game – with more investigative reporting, for instance – these primary sources of news for millions of Canadians should also qualify for assistance.
The initiative as it stands also disqualifies publications focused on sports, arts and other topic areas of great interest to audiences and an indelible part of Canadian culture.
It will be devilishly hard to decide who qualifies for assistance here, given that most mainstream news organizations, of necessity in satisfying their audiences, provide substantial amounts of content in those fields.
Finally, a proposed tax credit for buyers of digital subscriptions to news publications is useless to low-income Canadians who don’t pay taxes and is therefore regressive. (You’ll find those readers at your local library, whose paid digital subscriptions are funded by ratepayers, not Facebook and Google.)
And so, Ottawa’s welcome interest in restoring the strength of Canadian journalism remains a work in progress.
David Olive is a business columnist based in Toronto. Follow him on Twitter: @TheGrtRecession