Greenberg notes that some early implementation signals might include the restart of specific targeted immigration to help with key labour shortages as well as moves by provinces to lower some of their interprovincial trade barriers. The relaxing of regulations on key targeted industries, too, might be a signal of positive impact. He notes that while the budget does aim to spend a great deal on major projects, it comes with the target of incentivizing private sector investment in these projects, which may prove a better way of executing on targeted goals. He notes, though, private-public partnerships aren’t always successful and still need a degree of oversight from government.
Looking at the asset impacts of this budget, Greenberg notes that Canadian currency should remain largely rangebound until the long-term goal of more diversified trade is achieved. While Canada has maintained significant monetary policy divergence from the US in the past year, a secular decline in the US dollar has helped keep CAD somewhat stable against the greenback. Its position against other global currencies is somewhat less favourable, though, and Greenberg expects the currency to remain bound into a slightly weaker range until trade is more comprehensively diversified, though he notes that this may not be a bad thing for an export economy.
While a $78 billion deficit may be eye watering at first glance, the point has been stressed that among developed nations, Canada has ‘room to spend.’ Compared to countries like Japan and the United States, Canada has a comparatively lower debt to GDP ratio, but Greenberg likens the situation to a ‘less dirty shirt.’ Nobody in the developed world seems to have low levels of overall debt, but Canada has slightly lower public debt levels than its peers and retains a AAA rating in its bonds. While deficits are cause for concern, Greenberg notes that in a period of anemic growth and trade uncertainty, taking on debt in this way may be justified. He projects growth over the medium to long-term to rest just below two per cent, possibly rising higher if the budget is truly effective, and contrasts that with interest costs, which remain below growth.
“I would say Canada does have some room. I don’t think it’s we can’t spend like drunken sailors,” Greenberg says. “It needs to be efficient spending.”
As he assesses the effectiveness and efficiency of that spending, Greenberg says he will be looking closely at inflation and employment data. A cooling economy should see both indexes fall as well, so aberrations from that trend may be cause for further examination. He’ll also be listening closely to company reports as firm investments in productivity enhancing technologies may or may not prove additive for the overall Canadian economy.
