Earlier this week, I joined Justin Trudeau at the Canadian Club of Toronto, where he discussed the Liberal plan for fairness and growth for the middle class -- a central plank of which is to cut the middle class tax rate by seven per cent. Liberals will give a $3 billion tax break to those who need it most by asking the wealthiest Canadians -- those who earn more than $200,000 annually -- to pay a bit more.
While many politicians would have shied away, Mr. Trudeau took this message right to those who will be most affected by the increase, and laid out his argument for why a fairer tax system benefits everyone.
The fact is that nearly nine out of 10 Canadians believe the cost of living is outpacing their household income. Our economy has more than doubled in size since 1980, but median incomes have flat lined. Household debt has ballooned to over 163 per cent of disposable income. It's been estimated that the average 35-year-old Canadian now puts aside less than half of what their parents did at the same age, and the income gap between older and younger Canadians is growing. I know from my vantage point as a business leader that financial stress is causing significant anxiety for Canadians.
As Liberals, we believe a strong economy is one that provides the largest number of good jobs to the largest number of Canadians. But by that measure, we are in trouble.
Canadians continue to work hard, but the majority of them are finding it tougher and tougher to get by.
At the same time, there is another group of Canadians: those in the top one per cent of income earners. They are doing very well, have worked hard to achieve success, have accumulated assets, and are easily able to contribute to their children's education. These advantages have been buttressed by repeated Conservative government action over the past decade. Most of the people in this group know that our fast-paced global economy has simultaneously provided them with opportunity and a requirement to work hard.
But why should the wealthiest Canadians care about those who are falling behind? Contrary to what some may think, restoring fairness and reducing inequality is in the very best interest of all Canadians. The OECD found that higher inequality may actually lower economic growth, and that increasing inequality over time lowers GDP per capita growth. And I know that the wealthiest Canadians want to live in a society in which their fellow citizens have the opportunity to thrive. It's a Canadian value.
By cutting taxes for the middle class, we will generate a more robust and healthy economy, which in turn benefits everyone, including those at the top. It is in everyone's best interest for the middle class to grow.
The Liberal plan is founded on the fundamental premise that fairness for the middle class and those working hard to join it means stronger growth for all. It faces up to this central challenge. And our plan is aimed squarely at restoring that sense of fairness upon which this country was built, and upon which it has thrived.
The time has come to look beyond the boundaries of "what politics can do for me." As Mr. Trudeau stated, it's time to envision what we can help build for all Canadians. We can and should work, not in pursuit of narrow interests, but in everyone's best interests. We can and should be dedicated to working for the public good. Because as we all know, Canada is stronger when our middle class thrives.
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Many in Canada’s oil sector have been holding their breath to see whether the U.S. approves the Keystone pipeline,which would see tarry bitumen from Alberta’s oilsands pumped south for export from the U.S. President Barack Obama did not have very nice things to say about Keystone in his year-end press conference, leading some to believe he’s bent on rejecting it. The lack of a functional pipeline capable of getting the oilsands crude to international markets has held back the price of crude produced there. There’s also massive domestic opposition to homegrown alternatives such as the Energy East Pipeline or Northern Gateway.
This promises to be a big year for elections around the world, with votes at home and abroad. The Conservatives presided over a Canadian recession that was relatively mild compared to much of the world, but after nearly a decade of Conservative rule, voters could be ready for a change. The U.K. is looking ahead to an election in May. If the U.K.'s Conservative Party wins and follows through with its promise to hold a referendum on EU membership, it would be a further blow to the Eurozone. The U.S. is looking ahead to an election in 2016, and the year before an election in that country has proven to be an often interesting, volatile ride.
Weak demand and a glut of supply are keeping prices of commodities low, and it doesn’t just affect Canada’s oil patch. The mining sector, one of the heaviest hitters on the Toronto Stock Exchange, could see a resulting slowdown in investment in projects and hiring.
Canada, along with the U.S., is on track for an interest rate hike in 2015. It would be the first since 2010 and consumers — particularly on this side of the border — have continued to pile on debt loads and take out large mortgages in the years of low interest rates. While any hike is expected to be gradual, it could be a shock to some households who are struggling to pay back debt. A higher interest rate could sink more Canadians into bankruptcy and could cause a slowdown in the housing sector, which has propped up Canada’s economy in the years since the recession.
Economists have been warning consumers for years that debt loads are growing to astronomical levels, and that could be a huge risk if interest rates rise. In Canada, the household debt-to-income ratio rose to a new record high of 162.6 per cent in the most recent quarter. And things are not much better south of the border, where consumer debt is worth a total of $3.2 trillion and where there has been a resurgence in subprime lending, the risky banking practice that helped spark the global economic crisis in 2008.
An increase in terrorism and geopolitical instability doesn’t inspire confidence in investors. Threats from ISIS and other terrorist organizations have dominated headlines in the past year and such political uncertainty could spill over into broader conflicts or destabilize markets.
Russia’s ruble has sunk by about 40 per cent in the past few weeks, and the country could soon find itself in recession, partly due to Western sanctions over its aggressive behaviour in Ukraine. As a G8 country, it is a large source of demand for Canadian exports. The country already slapped retaliatory sanctions on Canada in 2014 and the lack of trade could hit Canada’s overall trade figures.
Chinese growth has been a massive driver of the global economy but is losing momentum, affecting the entire global supply chain. Investors are hoping that China’s GDP growth does not come in worse than the 7-per-cent rate it has predicted. A chain reaction caused by the slowdown in China could be particularly concerning for Canada, which had been protected from the worst of the Great Recession, benefitting from Chinese manufacturing’s demand for commodities. In addition, the unrest in Hong Kong, one of the world’s financial hubs, is not over, posing a risk of more uncertainty in the region.
That’s right, Greece is still causing Europe, and global markets, some serious headaches five years after its sovereign debt crisis was first brought to light. It is again making headlines as the new year approaches, with legislators rejecting Prime Minister Antonis Samaras’s nomination for president, Stavros Dimas, triggering a snap election. Polls favour anti-austerity candidates, which could see the country pull away from its debt obligations under its bailout plan with the Eurozone, stoking concerns for the rest of the continent, which is already struggling with sky high unemployment and a shaky financial system. A slowdown in Europe would have knock-on consequences for Canada.
After five years of relatively stable crude prices, oil prices have dropped nearly 50 per cent since June to their lowest level in five years. The drop is a double-edged sword for the Canadian economy. The IMF says it could boost global economic growth by as much as 0.8 percentage points above the expected 3.8 per cent. It’s also good news for consumers, whose savings at the gas pump could translate into more spending elsewhere. However, if oil continues to hover between $60 to $70 a barrel, it could expose weaknesses in oil-dependent countries and companies and even push some to default on debt obligations. The tanking price is bad for Canada’s oilsands, a major source of domestic economic growth and could push the loonie lower.
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