Opinion: Economic growth? Chrystia Freeland is misleading us

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Finance Minister Chrystia Freeland recently said Canada will have “the strongest economic growth in the G7.” But is that true? And are Canadians better off because of it?

The Trudeau government regularly uses comparisons among G7 countries (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States) to gauge Canada’s economic performance. And when comparing economic growth in the aggregate (meaning overall growth, as measured by GDP), Freeland is correct that Canada’s economy performs well compared to the rest of the G7.

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Specifically, from 2000 to 2023, Canada’s average GDP growth (adjusted for inflation) was second-highest in the G7 at 1.8 per cent annually (only behind the U.S.). And in a recent report, the International Monetary Fund projected that Canada’s overall GDP growth will be second-highest in 2024, and lead the G7 in 2025.

But there’s a serious problem with these measures — they fail to account for population growth rates in each country and therefore don’t measure whether individuals are actually better off.

Simply put, economies grow when there are more people producing goods and services (i.e. the population grows) or when people are able to produce more per hour worked (i.e. productivity increases). In recent years, the Canadian economy has grown almost exclusively due to the rise in population, which has grown at historic rates due to record levels of immigration, while productivity has declined to the point it’s now considered an emergency.

In fact, from 2000 to 2023, Canada led the G7 in average annual population growth, which has served to inflate the country’s rate of aggregate GDP growth.

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So, to more accurately measure Canada’s economic performance relative to other countries, economists use GDP per person, which accounts for differing population growth rates. This measure is a much better indicator of individual incomes and living standards.

On this measure, Canada is an economic laggard. Canada’s average annual growth rate in GDP per person (inflation-adjusted) from 2000 to 2023 was 0.7 per cent— tied for second-last in the G7, above only Italy (0.1 per cent).

If you include a broader subset of advanced economies, and focus on the Trudeau government’s tenure, the picture is even worse. From 2014 to 2022 (the latest year of available data), Canada was tied for the third-lowest average annual growth rate in inflation-adjusted GDP per person out of 30 countries in the Organization for Economic Co-operation and Development (OECD). Canada’s average growth rate during that period (0.6 per cent) was ahead of only Luxembourg (0.5 per cent) and Mexico (0.4 per cent).

Looking ahead, Canada’s long-term economic prospects are similarly dismal. According to the OECD, Canada is expected to see the lowest average annual growth rate in GDP per person in the OECD, from 2020 to 2030 and 2030 to 2060.

When Freeland boasts about aggregate GDP numbers — while ignoring how historic levels of population growth fuelled by record-high immigration inflate the numbers — she’s misleading Canadians.

In reality, Canadian living standards are falling behind the rest of the developed world, and are expected to fall further behind in years to come.

Jake Fuss and Grady Munro are economists at the Fraser Institute.

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