The battle lines have been drawn for the upcoming federal election, and Canada’s economy is front and centre. With recent news that we are officially in a technical recession, each political party is touting the measures they’ll make to turn the economy around. It’s a big challenge, considering the tumbling price of oil. In June 2014 the price of a barrel of oil was over $100; today’s is under $40. For a resource-driven economy like Canada, this has spelled disaster.
In addition to oil’s woes, global market panic and U.S. Fed liftoff speculation is anticipated to make a mark at home, and all eyes are on the Bank of Canada’s next move – should a third rate cut be warranted, how will that impact the upcoming election?
Let’s take a closer look at the economic revival promises made by each party.
Conservatives: Staying the Course
The Conservatives are taking a “steady as she goes” approach to the economy. Prime Minister Stephen Harper’s pitch to voters is that a steady hand is the best way to get Canada through the latest economic crisis, and that re-electing the Conservatives is the safest way to weather the economic storm.
“You do not — as any financial planner will tell you, whether it’s from the prime minister on down — you do not run around and change your plans based on daily market news. You have a long-term plan and you stick to it,” he said.
China, an economic powerhouse, has been rocked by steep declines in its stock market over the past week. Still dealing with the aftermath of lower oil prices, the slowing growth in Asia only spells more trouble on the home front as it translates to less demand for Canadian resources.
The Conservatives have been criticized for relying too heavily on oil and that this reliance has led to boom and bust cycles for our economy.
However, Harper responded to news of a technical recession by focusing on the positive – a slight 0.5 per cent GDP uptick in June after five consecutive months of contraction, stating, “We continue to see new data that indicates the Canadian economy is back on track,”
Liberals: Calling for Action
While the Conservatives take their “wait and see” approach, the Liberals say growth is the answer.
“The fact is now is not the time to remove millions and billions of dollars from the Canadian economy. Now is the time to grow the economy, to invest in the middle class and those working hard to join it,” said Liberal Leader Justin Trudeau.
While the Conservatives’ aim is to paint Trudeau as inexperienced, he’s alleged the current party isn’t relatable to Canadians, stating, “Stephen Harper is completely out of touch with the reality that Canadians are going through across this country.”
He’s also received support from former finance minister Paul Martin, who brought Canada back to a balanced budget. Martin was on hand at a recent campaign stop to rally behind the Liberal leader. Martin criticized the Conservatives for being “idle observers,” instead of doing something about the economic problems we currently face.
New Democrats: Promising Compromise
The New Democrats are taking a cautious approach to the economy, leading with a promise to eventually balance the budget.
“We’re of course going to finish the fiscal year on Mr. Harper’s watch — 2015-16 is his budget — but our first budget will be a balanced budget,” said New Democrat Leader Thomas Mulcair.
One of those campaign promises is a child care plan that is pegged to cost the economy $5 billion a year. Despite the high price tag, Mulcair says his party won’t run a deficit in its first year in office if elected.
The Bank of Canada: Will They, or Won’t They?
Our central bank really is the wild card, as speculation rages over how it’ll respond to the latest recession data. Last week, traders said there was a 44 per cent chance the Bank of Canada would cut interest rates at its next meeting on September 9th. To emphasize the Conservative’s reputation as good handlers of the economy, Harper said he’s spoken directly to Bank of Canada Governor Stephen Poloz. It will be interesting to see if, now that the official data is in, Poloz will concede that there is indeed a recession, as he declined to confirm when the Bank cut rates in July.
If the Bank of Canada decides to reduce interest rates before the election, it could play into the hands of the Conservatives. Voters may be hesitant to vote in a new party in the middle of a financial crisis. However, a rate cut could show that the Conservative’s economic plan isn’t working. With a long election campaign still to come, it will be up to voters to decide which party is best equipped to handle the tough economy road ahead.
Sean Cooper is a Financial Journalist and Personal Finance Expert, living in Toronto, Ontario. He offers Unbiased Fee-Only Financial Advice, specializing in pensions and the decumulation of financial wealth in retirement. Follow him on Twitter @SeanCooperWrite and read his blogs and request his writing services on his personal website: http://www.seancooperwriter.com/