Old habits die hard in the Canadian economy

Can oil really substitute for easy money in propelling Canada’s growth?


Joshua Roberts/Reuters

In his final address as governor of the Bank of Canada, Mark Carney concluded: “We cannot grow indefinitely by relying on Canadian households increasing their borrowing relative to income. Nor can residential investment remain near a record share of GDP, particularly given signs of overbuilding and overvaluation in segments of the real estate market.”

Obvious as that may sound, growth by debt has been Canada’s only real game plan under Carney. Weaning ourselves off that addiction will be the single greatest challenge facing the country in the coming years, as interest rates begin to rise—expected some time in 2015—and the housing market cools.

Can it be done? The latest economic data would seem to offer some measure of hope.

Canada’s economy grew at an annualized rate of 2.5 per cent in the first quarter, better than expected and better than the 2.4 per cent in America, which has been in the midst of a healthy rebound lately. (This comes as housing sales dropped three per cent in April from the same time last year and prices, according to a Reuters poll last week, are forecast to drop five per cent in the next few years.)

The growth last quarter was attributed largely to a jump in exports—mostly energy products, which were up 22 per cent on an annualized basis. Exports of crude to the U.S. hit their highest level in February in two decades, said the U.S. Energy Information Administration. For Canada to thrive in a period of rising rates and a cooling housing market, it must, as Carney said, “rotate the sources of growth” toward things like exports.

But trading our addiction on easy money for an addiction to oil is a risky bet. The U.S. is now awash in its own reserves—it already tops Russia as the biggest exporter of refined petroleum—and the future of the Northern Gateway (nixed by B.C. last week) and Keystone XL pipelines (mired in U.S. politics) is as murky as ever. Aside from exports, Canada’s economy is still limping. Domestic demand was up just 0.1 per cent last quarter, the worst showing since 2009. Few economists expect next quarter’s results to be as rosy as the last.

So where does that leave Canada? For the time being, still reliant on low interest rates and its housing market. Old habits die hard.


Old habits die hard in the Canadian economy

  1. “and the future of the Northern Gateway (nixed by B.C. last week) and
    Keystone XL pipelines (mired in U.S. politics) is as murky as ever”

    Northern Gateway is an ongoing negotiation and Obama is about to be overruled by Congress if he doesn’t get off of his leftist ass and approve Keystone XL.

    • The political elites may well want gateway. But it is the ordinary folks of BC who are going to have the final say… shoulda treated those native folks with more respect there Billy Bub!

      • If clues were shoes you’d be barefoot.

        Inter-provincial pipelines are federal jurisdiction, environ-Mentalists are not the majority in BC or Canada and the BC NDP can blame their abysmal result in the recent BC election on Glo-Bull Warming, the biggest fraud in human history.

        • So you think the Feds will push NGP whatever the BC public wants? You’re as loony as Flanagan.

          • Somebody’s gonna die over this yet.

          • I doubt it. FNs are pretty lawyered these days. But if they don’t kill it for some reason there’ll be massive civil disobedience for sure.

          • Out in the field….it doesn’t much matter.

          • Who just lost the election in BC?

            Apparently the majority of British Columbian’s don’t agree with you or your fellow leftwingnutz.

          • Take a closer look and read between the lines dimwit ; you’ll find many liberals ( and conservative for that matter) dont want Tankers on the coast either.
            It ain’t happening there skipper. Back to fishing for you.

          • There are tankers on the west coast right now, they’re not going to go away, they are an economic reality.

            Still hard aground on that lee shore, eh?

          • Nope. The exclusion zone is still in place. There have been a dozen or so sailings during the Campbell govt. But there have no routine sailings of the size of tanker envisioned for Gateway.

          • Boats usually run aground on the windward shore where the winds BLOWSHARD. The chances of a tanker accident rises with their frequency. I would hazard a guess that with the pipeline it would be ahundred fold.

  2. From the American Petroleum Institute;

    The United States and Canada enjoy the largest trading partnership
    across the longest peaceful border in the world. Getting more U.S.
    energy from our friendly North American neighbor would reduce U.S.
    reliance on energy resources from less stable regions, create American
    jobs, while enhancing domestic energy and national security. The
    Keystone XL pipeline expansion would provide a significant boost to U.S.
    energy security, bringing more than 800,000 barrels of oil per day to
    U.S. refineries. With the pipeline, our crude imports from Canada could
    reach 4 million barrels a day by 2020, twice what we currently import
    from the Persian Gulf.

    Approval of the full Keystone XL pipeline, now in its fourth year of
    review, could also create 20,000 construction and manufacturing jobs
    over the life of the project. According to a 2011 CERI study, if there
    were no pipeline constraints, new oil sands development could support
    over 500,000 additional jobs in the U.S. by 2035.

    The U.S. government’s own environmental review indicated that the
    Keystone XL pipeline would “have a degree of safety over any other,”
    offering a safe, practical way to bring not just more Canadian oil to
    U.S. refineries but domestic production from our upper plains states as
    well. This is good for consumers, good for U.S. jobs, good for energy
    and economic security and certainly serves our national interest.

    • Fracking is going to change everything. We’ll be lucky if we can even maintain current levels of exports to the US from FMac. It isn’t clear yet, but there’s every possibility new and cheaper( not to mention cleaner) non renewables are a threat to the very existence of the oil/ tar sands. Suck on that deniers.

      • Fracking has been around for over seventy years…………heh

        • Fracking the way it is done now is only about a decade old. The proof is that old wells in Texas and other states are being re-opened and are often expected to yield as much in the future as they did in the past. If fracking was so old this would not be the case.

      • they still imports millions of barrles from other sources… even if consumption in America falls another 1 million barrles a day, they will still have to produce several million to close the rest of the gap…

        And even if they succeed in closing the gap, we can still export the raw product to refineries in teh gulf of mexico which they would then export…

        I dont see a danger.

  3. Well while our oil types, and economists have been busy with their heads up their asses….the world has changed.

    The oil era, the industrial age, the ‘easy money’ age…..is over.

    And just like the jobs lost to China….not coming back.

    • Easy money is what federal and Ontario Liberals steal from taxpayers when they are in power.

      Oil will be around for a very long time.

      Natural gas production will increase globally.

      I don’t know about you, but I avoid Chinese manufactured products…….personal choice.

      • Nobody steals from taxpayers…..we vote a govt in. It’s a choice we make.

        Oil will be around….just like stones are still around….but we no longer live in the stone age. You can make natural gas from garbage dumps.

        I doubt you can avoid Chinese products…..they’re everywhere.

        • Read the label before you buy.

          • I repeat….I doubt you can avoid Chinese products.

            And I don’t try. I do business with the Chinese. The west wanted them to go capitalist….and they did. Beating our sox off too.

          • You repeat yourself when you’re distressed.

            Where’s Uncle Mo?

          • I repeat myself when I’m talking to hillbillies.

            Mao died last century…..why don’t Cons ever have up-to-date calendars?

            Always behind the times….probably on the Julian calendar at that!

          • Uncle Maurice, or Mo or maybe you’d like that spelled Moe, just to make it simple enough for you………..: )

          • A brilliant Canadian recognized everywhere except in Hillbilly Holler, Alberta. No wonder he left.

          • He left because of his role in the Oil for Food Scandal at the UN.

            Just another LPoC crook.

          • Maurice Strong is a washed old fraud, Glo-Bull Warming my ass.

          • LOL you can’t even FIND your ass

          • I never really had a look at Maurice Strong’s CV and I am quite awed. And amazing man. This Billy Bob is just a troll, and not a smart one at that. Wouldn’t waste my time on him.

          • Considering the time and place….Strong is a surprising person eh?

  4. Even a economics neophyte like me can see that need more domestic demand and sky high household debt ain’t going to add to to no positive outcome, or some good thang.Where did those boys got there economics degrees… Harvaaard! ure somewheres overeddicated like thet!

  5. As soon as BC’s premier wins a seat in the legislature Christy Clark and Allison Redford will be talking again about Northern Gateway, no matter what the environ-Mentalists say or do, keep on living in your land of lollipops, fairy tales and unicorns.

    • You just told us a majority of British Columbians want the pipeline. Now you’re telling us that Clark has to deceive voters about her pipeline intentions in order to win a seat.

      Which is it Bob?

      • Lenny, Lenny, Lenny…………….did you just fall off of the turnip wagon?

        Pay attention now…….the premier didn’t win a seat, so……….there will be a by-election in a riding where a Liberal MLA will have given up that seat.

        Clark has never said there will be no more negotiations……got it?

        • None of your incoherent non sequitur has anything to do with my question.
          I guess its hard not to contradict yourself when you’re in the habit of just spewing out whatever bullshit is convenient.

          • You’re clearly not the sharpest knife in the drawer Lenny, you must hang out with Emily.

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