Canada's Wake-Up Call
Canada's Wake-Up Call: A Critical Examination of Economic Challenges and Structural Reforms for a Prosperous Future
It only took one person to wake up the entire world, and now everyone is mad at him. Perhaps he is partially right; the reliance on America is so great that if a hindrance to that reliance emerges, these dependent economies could collapse. So, who is taking advantage of whom?
With that said, we are now seeing many major players in Canada finally speaking up about the dismal productivity in the country, or even taking action to either leave for greener pastures or adapt their business needs accordingly. Below are some examples from recent earnings calls that highlight this issue:
National Bank of Canada's Q1 2025 investor relations material
Canada's economic performance has lagged behind other G7 nations.
There is a notable decline in productivity and GDP per capita.
Insufficient investments in manufacturing and R&D, coupled with excessive regulation, are challenges.
Proposals include deregulation, accelerated depreciation on capital investments, reduced taxes on capital gains, and the introduction of a "Buy Canada Act.
Just look at the language at one of management’s responses during the Q&A below.
“Now we must not only rebuild our relationship and negotiate economic and trade terms with our largest partner, we must also get investments off the ground in our country. Concretely, Canada must consider appointing a nonpartisan head of deregulation to identify and recommend removal of unproductive red tape, accelerating depreciation on capital investments for businesses reducing taxes on capital gains for business owners allowing the deferral of tax payable on the transfer to future generations or on a sale to employees to preserve Canadian ownership of businesses focusing on permits, not subsidies adopting a Buy Canada Act to promote and give priority to local businesses, notably to increase defense spending with Canadian procurement in the aerospace industry, manufacturing sector and critical infrastructure (…) I also urge decision makers to remove all interprovincial trade regulation hindering Canadian productivity. Canada is a resource rich country. It is our responsibility to ensure that our people benefit from the full economic potential of our energy, natural resources, agriculture and manufacturing sectors today and in the future.”
Bank of Nova Scotia’s Q1 2025 investor relations material
They emphasize the potential for an integrated North American economy to drive competitiveness and collective prosperity. The bank sees this period as an opportunity for Canada to reflect on trade and productivity challenges, which, if addressed, can redefine the national economic agenda. Key objectives include lower taxes, less regulation, boosting investment, and energy policies that increase export opportunities for Canadian oil and gas.
Royal Bank of Canada’s Q1 2025 investor relations material
Management believes this is a chance for Canada to make structural improvements to the country's economic productivity and competitiveness, including removing inter-provincial trade barriers and approving high-impact energy and infrastructure projects.
Toronto Dominion’s Q1 2025 investor relations material
Here’s a quote from management straight out of the earnings call, no need to paraphrase:
“The current situation is also a clear signal that Canadian governments and businesses must pull together, remove the obstacles that hold back national productivity and strengthen our competitiveness.
Interprovincial trade barriers are something we must tackle, accelerating critical projects to untapped mineral, energy and resource production and leadership is another key focus area. We also need to evaluate tax regulatory and other policies to retain talent, create the right conditions for businesses to grow and make Canada a top destination for foreign investment. I believe Canada has an opportunity to build on its strength and create the right conditions for our economies to thrive in the future.”
TFI International’s Q4 2024 investor relations material
Redomicile Plan: The company plans to redomicile from Canada to the U.S. to better align with its shareholder base and commercial presence.
TFI International initially announced plans to redomicile from Canada to the United States to better align with its shareholder base and commercial presence. The company noted that 70% of its operations and a significant portion of its shareholders are based in the U.S. The move was intended to enhance the company's strategic positioning and potentially benefit from foreign exchange rates and U.S. Defense Department contracts. However, the plan faced significant backlash from shareholders, particularly from the Quebec pension fund, the Caisse de Depot et Placement du Quebec (CDPQ), which holds a 4% stake in TFI International. CDPQ expressed strong dissatisfaction with the decision, emphasizing the importance of keeping the company's headquarters in Quebec. In response to the feedback from shareholders, TFI International decided to reverse its decision and remain a Canadian corporation.
Close call.
Here are additional examples of Canadian companies addressing how they are tackling economic challenges and improving productivity in their earnings calls:
Cenovus Energy: During their earnings call, Cenovus Energy discussed the potential impact of tariffs and how they might spur a rebalancing away from the United States for their products. They emphasized the importance of diversifying their exports to hedge against tariffs.
Air Canada: Air Canada mentioned that they could reduce flights to some U.S. destinations if customer demand lags amid trade disruptions. They are considering redeploying planes to domestic leisure markets instead.
Loblaw: Loblaw highlighted the significant uplift in sales of domestic products after promoting them on grocery-store shelves. They also warned that retaliatory tariffs would make imports more costly, impacting retail prices.
Canadian Tire: Canadian Tire is reviewing its products and U.S. suppliers to find alternatives and insulate customers from higher trade costs.
Tim Hortons: Tim Hortons is closely monitoring costs to mitigate the impact on consumers if tariffs take hold
The wake-up call has arrived at last!
Statistics Do Not Lie (2015–2024)
Over the past 10 years, the Canadian economy has experienced a mix of growth and challenges, with its trajectory shaped by a combination of domestic policies, global economic conditions, and structural shifts. The past decade has seen a shift from a resource-driven economy to one increasingly reliant on population growth, real estate, and service sectors, amid declining productivity and per-capita output. Here's an overview based on available data and trends up to February 26, 20251.
Growth Trends
Aggregate GDP Growth: From 2015 to 2023, Canada’s real GDP growth averaged about 1.8% annually, placing it second in the G7 behind the United States (1.9%).
Per-Capita GDP: When adjusted for population, growth has been far less impressive. Real GDP per capita grew at an average annual rate of just 0.8% from 2013 to 2023—its lowest since the 1930s. From 2015 to 2022, cumulative per-capita growth was a mere 2%, compared to 12% in the U.S. over the same period. Since 2019, per-capita GDP has declined in six of seven consecutive quarters by 2024, falling 3.1% below pre-pandemic levels.
Growth Rates
This data shows a clear divergence: the public sector has ballooned, especially post-pandemic, while private sector growth has been anemic, dragged down by self-employment losses.
Public Sector:
2015–2024: From 3,611,000 to 4,400,000 = +789,000 jobs (~21.8% growth).
Average annual growth: ~2.4%.
Notable surge: 2019–2023 saw a 13.0% increase (3,780,000 to 4,270,000), driven by post-COVID hiring.
Total Private Sector (Including Self-Employed):
2015–2024: From 14,376,000 to 15,150,000 = +774,000 jobs (~5.4% growth).
Average annual growth: ~0.6%.
Weakness: Growth slowed significantly post-2019, with a 3.6% rise from 2020 to 2023.
Alarming Statistics
Productivity Crisis:
Labor productivity (GDP per hour worked) has declined in 11 of the past 12 quarters by mid-2023, sitting 2.1% below pre-pandemic levels by Q2 2023. Between 2019 and 2024, productivity growth was near 0%, a historic low. The Bank of Canada has called this an "emergency," as it hampers wage growth and competitiveness.
Per-Capita GDP Decline:
By 2024, Canada’s per-capita national income fell to 70% of U.S. levels, down from 80% in 2019—a stark reversal from decades of parity.
Living Standards Erosion:
Inflation-adjusted wages have shown no growth since 2016, and household spending per person dropped 2.6% from its post-pandemic peak by 2023, remaining 2% below 2019 levels. The Fraser Institute dubbed 2024 the worst decline in living standards in 40 years.
Debt and Inflation Pressures:
Household debt is the highest in the G7, exacerbated by rising interest rates since 2022. Federal government spending hit record per-person highs from 2018 to 2024, with the Trudeau administration recording the seven highest years in Canadian history. Food inflation rose 25% and energy costs 30% since 2019, driving a 40% increase in bankruptcy filings by 2024.
Economic Divergence:
Canada’s growth lagged the U.S. post-2022, with annual real GDP growth falling to 1.1% (2020–2022) versus 1.7% in the U.S. Among 50 developed economies, Canada had the lowest per-capita growth rate since 2019.
Critical Takeaways
Canada’s economic growth over the past decade has leaned heavily on population increases and real estate, rather than productivity or innovation—areas where it has faltered. While avoiding a technical recession, the reliance on immigration to inflate GDP has hidden a deeper stagnation, with alarming declines in per-capita output, productivity, and living standards. High debt, inflation, and an aging demographic further complicate the outlook, suggesting that without structural reforms, these trends could persist.
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