Executive Summary

Strong economic
position despite risks
Canada’s economic position is relatively strong, despite lingering risks deriving from internal trade hurdles, high levels of household debt, sluggish business investment and overheated property markets in major cities. Labor-market conditions continue to be favorable, with the unemployment rate near an all-time low at 5.5%; many companies are reporting an acute shortage of skilled workers, and Canadians are also seeing wage gains accelerate. On the policy side, the Trudeau government showed resolve in facing the North American Free Trade Agreement (NAFTA) renegotiations and a canola ban from China, avoiding an economic downturn. Although Trudeau has now completely abandoned his promise of a balanced budget by 2019, his government remains in a strong fiscal position, with low levels of debt despite growing deficits. Unfortunately, the same cannot be said about the provinces, many of which find themselves in a precarious fiscal situation projected to worsen due to the strain caused by rising healthcare costs.
Some electoral promises
fulfilled…but often
fall short of reform expectations
Prime Minister Trudeau’s first term in office brought many successes, most notably the implementation of a national carbon tax, and a change in the child benefits system that resulted in a sharp decline in child poverty. Indeed, it appears that the Liberals in power have delivered at least in part on the vast majority of their electoral promises. These successes notwithstanding, the government has been plagued by unfulfilled expectations dating from the 2015 campaign. Many of the bills introduced have been lackluster, falling short of the “transformational” reforms that were pledged. For instance, the Trudeau government dropped its campaign promise to eliminate first-past-the-post federal elections. While some are of the opinion that the complete abandonment of electoral reform reveals a long-standing and fundamental failure of governance and a lack of commitment to structural change, others believe there was no societal consensus on that issue. Individual provinces such as Quebec may yet institute electoral reforms, and the lessons from these experiences may eventually lead to change at the federal level. Provincial experimentation leading to national adoption has worked in many policy areas such as healthcare, and might work similarly in electoral reform.
Much less controversial is the view that the administration failed to resolve the problems associated with the disastrous Phoenix pay system, a payroll processing system for federal employees that was introduced in 2011.
New budget offers
modest strides
The 2019 budget, while lacking some of the big-ticket items expected from a Liberal government, seems to build modestly on the Liberal’s platform. The budget provides further subsidies for electric cars, decreases the interest rate on student loans, and has plans for the creation of a national pharmacare plan. Notably absent are a national childcare plan, sufficient funding for Indigenous infrastructure and reconciliation, and a credible strategy to improve housing affordability in the major cities.
Federal-state relations remain tense
Federal-provincial relations are another area in which the government is haunted by the 2015 campaign. Attempts to find an appropriate balance between anti-climate-change policies and the interests of Canada’s large natural-resources sector have led both to the approval of several pipelines and the introduction of a national price on carbon. Rather than appeasing the growing sentiment of western alienation, these policies further inflamed the tensions between the West and Ottawa. Calling for a cancellation of the carbon tax and a complete overhaul of the recently passed environmental-assessment act, the governments of Alberta and Saskatchewan have been quite vocal about their disdain for the federal government. The Liberals failed to win a single seat within these provinces in the most recent federal parliamentary election. At the same time, environmental groups and community stakeholders in British Columbia have been baffled by the government’s decision to purchase and subsequently approve the Trans-Mountain Pipeline. Much needs to be done to repair the relationship with the West and stop the Wexit movement from picking up momentum. Relations with all provinces are also going to continue to be tense as fiscal pressure builds, particularly as healthcare-system sustainability is set to deteriorate as Canada’s population ages.
Commitments to Indigenous groups unmet
Government relations with Indigenous peoples remain fraught. Overall, Indigenous people face worse outcomes in the labor market and justice system than do non-Indigenous Canadians. As in other areas, Prime Minister Trudeau’s government has had difficulty meeting its commitments here. The educational system on reserves, overseen by the federal government, remains underfunded compared to the provincially managed schools outside reserves. Infrastructure systems are critically inadequate, especially with regard to drinking water. The government’s National Inquiry into Missing and Murdered Indigenous Women and Girls was initially greeted with cautious optimism, but is now widely seen as flawed due to high-profile mismanagement and resignations.
Many gaps remain
to be filled
Overall, Canada retains its relatively strong position in relation to sustainable governance but there are many gaps that need to be filled. Canada will have to act with resolve if it wants to keep its position in relation to the world.
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