2017 Outlook – Canada – Economy and Government SpendingBY: PAUL YOUNG, CPA, CGADATE: DECEMBER 18, 2016

Description• This presentation will look at the 2017 economy for

Canada. It will focus on key areas like exports, government spending, domestic spending, wages, employment, infrastructure as well as other areas of policies.

Agenda• Key Indicators / Canada• Employment• Exports / Imports • Real Estate/Housing• Retail Sales • Government spending• Business Investment

Key Economic Indicators

Source – National Bank of Canada

Job Market / 2017

• Wind Turbine Technician – Annual Salary - $57,931• Occupational therapy assistants - Annual Salary - $52,381• Physical therapy assistants - Annual Salary - $41,398.50• Home health aides - Annual Salary - $41,067 • Nurse anesthetists, nurse practitioners, and nurse

midwives – Annual Salary - $73,391 to 87,100• Physical therapists - Annual Salary - $93,542• Statistician - Annual Salary - $63,291• Operations research analyst - Annual Salary - $49,998• Personal finance advisors - Annual Salary - $47,041

Source - http://www.cheatsheet.com/money-career/10-jobs-hiring-like-crazy-2017.html/?a=viewall

Student Debt $25,o00 Source – National Post

Annual Salaries• The average

earnings are about $40K - Source – Stats Canada

- # of Graduates is about 500K/year

- Employment market is creating about 200K new jobs per year – FYI – bulk of new jobs are part-time

- Source – Stats Canada

Millennials

Job Market / November 2016• Family income for house today is $100K+

“The country added a net total of 11,000 jobs in the month, but all of the gain was in part-time work. Full-time employment fell by 8,700 positions, while part-time jobs grew by 19,400.In fact, over the past year, Canada has lost 30,500 full-time jobs, while gaining 213,700 part-time jobs. That likely helps to explain why wages in Canada are falling, when adjusted for inflation.”Source -http://www.huffingtonpost.ca/2016/12/02/unemployment-canada-november-2016_n_13369418.html

Income and Housing Mortgages

• Average weekly earnings of non-farm payroll employees were $957 in September, virtually unchanged from the previous month (-0.1%) and up 0.4% from 12 months earlier.

Average house Price $481,991 (October 2016)

Average Income $50K (September 2016)

• A key mortgage rate is on the way up again at Toronto-Dominion Bank. 

• The bank said its five-year closed mortgage special rate will increase by 10 basis points to 2.94 per cent, effective Thursday, matching a hike last month by RBC. Source – CBC.com

After tax income per month would be $2,500

Two income: 100K or 5,000/month (after tax incomeRatio: 38% of your after tax income would cover the mortgage Source – CBC, CTV, CMHC, Stats Canada and mortgage calculator

Exports / Imports

Source – Stats Canada and National Bank of Canada

Analysis/Commentary• Slow GDP growth

around the World• Key markets like

Vietnam, Malaysia, India, Indonesia and Thailand lack FIPA and Trade Agreements

• United States red tape/regulation and taxation reforms will support growth in the United States

• Canada lacks the infrastructure to expand exports (oil, gas, grains, etc.

• For each $1B in exports there is 5,500 new jobs

• Canada is export driven economy due to its population size

Retail Sales / Canada

Source – Stats Canada, Global News and National Bank of Canada

Analysis/Commentary• Wages are not keeping

pace with inflation• New carbon taxation for

Ontario and Alberta will cost household family about $2,500/year

• Household debt continues to climb

• Online ordering will to be the growth area for retailers

Government spending

Source – Fraser Institute and RBC

Analysis and Commentary • Keynesian economics has been

used by governments over the years with limited success.

• There are right investment, i.e. infrastructure and tax cuts

• 40% of government spending tends to get wasted

• It is not one policy that supports economic growth, but a combination of policies.

• Today’s debt and deficits are tomorrows to tax increase and/or spending cuts.

• All levels of government need to focus on value for money when it comes to delivery program spending.

• Increasing taxation does not lead to economic growth - https://www.youtube.com/watch?v=hWarBMfshaA&t=29s

Business InvestmentAnalysis / Commentary• Businesses need to invest

more in R&D/Innovation. • Government needs to

review the CCA deduction for Manufacturing and processing equipment

• Key investment in infrastructure, i.e. roads, bridges, pipelines, ports, rail lines, etc. is required.

Summary - Risk Factors • Government spending will not on its own increase economic growth• New taxation like carbon taxation could impact household budgets. Consumer consumption is a key driver for the

economy in Canada• Access to Canadian goods and services needs to improve through more FIPA and Trade Deals. TPP is at risk due to

change in government in the United States• Housing market reforms could influence housing market in Canada. There are greater risk to the housing market due to

issues, like bids and ask, slow wage growth, red tape, construction costs and commute times. Many areas need to be fixed to stabilized the real estate market

• Job market is producing too many part-time jobs. Part-time jobs do not produce the economy benefits that would support consumer spending.

• Business investment needs to improve. Many businesses are reluctant to spend on areas like capital equipment, innovation and headcount due to sluggish market conditions.

• Growing household debt in Canada could impact overall consumer consumptions. Many economic reports mentioned consumers will help the economy. The problem is that household budgets are under pressure due to taxation/hydro costs/users fees by all levels of government

• United States government taxation and red tape reform could change the competitive environment in North America. Canada is still interconnected with United States as such changes to government policies could have impact on where business investment is done by Canadian Corporations.

• Middle class is under pressure in Canada, but also around the world. Canada has help the middle class due to its taxation cuts as well as income redistribution of wealth in the past. However, very few governments in Canada are either running surpluses or balance budgets. The debt and deficits could impact the delivery of program spending in Canada.