July 17, 2014 – Canada’s performance in business investment per worker relative to its peers is sliding, led by dismal performances in Quebec and Ontario, according to a new C.D. Howe Institute report. In “Capital Needed: Canada Needs More Robust Business Investment,” authorsBenjamin Dachis, William B.P. Robson and Nicholas Chesterley find that Canada, after several years of improved performance, is equipping its workers less well than countries like Australia and the US.
“Even resource-rich Western Canada, and the energy and resource sector as a whole, is experiencing a loss of momentum in business investment,” remarked Robson. “This is a problem as business investment is critical to economic growth.”
In 2014, the average Canadian worker appears likely to enjoy only 71 cents of new investment for every dollar of investment enjoyed by US workers. In Australia, investment per worker still outstrips Canadian investment per worker by more than $6,000. When comparing the provinces, Ontario and Quebec, for the first time in at least three decades, get the lowest rank for investment per worker. Atlantic Canada on the other hand is experiencing robust growth for 2014, while growth is slowing in much of Western Canada.
The authors recommend that policymakers boost private-sector investment through such measures as prioritizing growth-friendly taxation, increasing the rewards for research and development and innovation, and creating private investment opportunities in infrastructure and electric power. For example, they suggest that the Ontario government should open new opportunities for private investment in its electricity utility sector, such as in local distribution companies and generation.
“Complacency regarding Canada’s poor performance would be a mistake,” said Dachis. “Policymakers must work fast to reverse these worrisome trends. Otherwise, Canadian workers will continue to lack the capital they need to do their jobs and raise their living standards.”
The C. D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. It is Canada’s trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review. It is considered by many to be Canada’s most influential think tank.