Transition Briefing Overview

For information

This information note is intended to provide you with the information and context required to evaluate and plan the scope of your work over the coming weeks. The note includes:

In addition, a full description of the Department, your statutory responsibilities and authorities, and the organizations in your portfolio is included in a separate briefing binder ("How the Department of Finance Works") as a reference manual for you or any new incoming staff in your office.


Table of Contents

*Redacted* Economic and Fiscal Outlook
*Redacted* Platform Commitments


1. Economic and Fiscal Outlook

i. Economic Context and Challenges

Since mid-2018, there has been a widespread slowdown in global economic activity. New tariffs, and heightened uncertainty surrounding trade and geopolitical developments have reduced business investment and manufacturing output in key trading economies. This is dampening global economic activity despite recent moves by most central banks towards a more accommodative policy stance.

Moreover, there are fundamental shifts taking place globally, which may have longer lasting, if less immediate, impacts on future global economic growth:

These long-term economic and geopolitical trends will have important implications for Canada's ability to continue to increase living standards. Canada also faces more specific challenges. The global transition to a low-carbon economy will have a particular impact on our energy sector. Our high level of household indebtedness also makes our economy more vulnerable to external shocks and may constrain future monetary policy actions.  

The Department's analysis of economic developments and public opinion research lead us to conclude that, despite ongoing wage growth, these developments and the associated challenging global economic and geopolitical backdrop more generally, have created a sense of anxiety that Canadians are feeling about their economic prospects. Many of the Government's platform commitments are directed at addressing these concerns. Maintaining Canada's economic advantages and succeeding in this challenging global environment will, however, require a focus on medium-term growth-oriented policies targeted at:

*Paragraph redacted*.

ii. Canadian Economic Outlook

Over the past three years, the Canadian economy has held up quite well in an environment of slowing global growth and rising trade uncertainty. The labour market remains strong, with historically low unemployment rates and high labour force participation rates. On average over the last year, 40,000 new jobs have been created each month, twice the pace registered over the previous five years.

Wage growth has picked up to close to 3 per cent, reflecting the increasing tightness of the Canadian labour market. This is a welcome development as wage growth has been weak since the recession of 2008-09. According to some measures nominal wage growth in the past 3-months has picked-up to its fastest pace since 2009 and well above the general rise in prices. Given the strong pace of job creation, we expect that this pick-up in wages should translate into healthy income gains for Canadian households in the near term. Whether or not this trend is maintained will largely depend on the extent to which the global economic slowdown affects Canadian output and labour demand.

Housing markets were soft in 2018, reflecting the combined impacts of previous increases in interest rates, provincial policies to deter unproductive housing activity and federal policies to reduce household indebtedness. However, housing activity has been rebounding in recent months, due in part to recent declines in interest rates back to the low levels seen in 2015-2017. Price growth has picked up in Toronto to 10 per cent (3-month change, annualized), while in Vancouver prices have started to rise again following declines since spring 2018.  

The Department continues to monitor three major concerns with the Canadian economy:

After a strong rebound in the second quarter of 2019, recent data suggest that economic growth in Canada will return to a more moderate pace closer to the potential growth rate of the economy in the second half of 2019, between 1 ½ and 2 per cent.  

The Department regularly surveys private sector forecasters for their views on major economic variables such as GDP, consumer price inflation, the unemployment rate and interest rates, generally following each release of the quarterly National Accounts (GDP) data. Since 1994, the average of these private sector forecasts forms the basis for the economic assumptions used for fiscal planning in the budget and Fall Update. This practice has been strongly supported by external organizations such as the International Monetary Fund.

The Department surveyed the group of private sector economists in September, following the release of the National Accounts second quarter results for 2019.  The September survey data are typically used to support the government's economic and fiscal projections published in the Fall Update. Overall, the projected level of nominal GDP (the broadest single measure of the tax base) in the September survey is in line with the Budget 2019 projections (Table 1).

Table 1. Average Private Sector Economic Forecasts – Annual
per cent, unless otherwise indicated
  2019 2020 2021 2022 2023 2024 2019-23
Real GDP Growth              
  Budget 20191 1.8 1.6 1.7 1.9 1.9 - 1.8
  September 2019 survey 1.5 1.7 1.8 1.8 1.9 1.9 1.7
GDP Inflation              
  Budget 20191 1.6 1.9 2.0 2.0 2.0 - 1.9
  September 2019 survey 2.0 2.0 2.0 2.0 2.0 2.0 2.0
Nominal GDP Growth              
  Budget 20191 3.4 3.5 3.7 3.9 4.0 - 3.7
  September 2019 survey 3.6 3.7 3.8 3.8 3.9 3.9 3.8
Nominal GDP Level ($billions)              
  Budget 20191 2,300 2,381 2,469 2,567 2,669 -  
  September 2019 survey 2,298 2,383 2,473 2,568 2,668 2,772  
    Difference with Budget 2019 -2 1 4 2 -1 - 1
3-month Treasury Bill Rate              
  Budget 2019 1.9 2.2 2.3 2.4 2.5 - 2.2
  September 2019 survey 1.6 1.5 1.6 1.9 2.2 2.4 1.8
10-Year Governement Bond Rate              
  Budget 2019 2.4 2.7 2.8 3.1 3.3 - 2.9
  September 2019 survey 1.5 1.6 2.0 2.4 2.7 3.0 2.0
WTI Crude Oil Price ($US-barrel)              
  Budget 2019 59 60 61 63 65 - 62
  September 2019 survey 57 57 58 62 64 65 59
1 Figures have been restated to reflect the historical revisions in the Canadian System of National Accounts.
Sources: Department of Finance February 2019 and September 2019 surveys of private sector economists.

*Pages redacted*

Report a problem or mistake on this page
Please select all that apply:

Thank you for your help!

You will not receive a reply. For enquiries, contact us.

Date modified: