Liberals eye infrastructure, foreign investors as tonic for slow growth
Finance Minister Bill Morneau’s fall economic statement boosts infrastructure spending and steps up efforts to woo foreign investment.

TheStar.com
Nov. 1, 2016
Bruce Campion-Smith and Alex Boutilier

The federal government is promising a big boost to infrastructure spending over the coming decade and will step up efforts to woo global investment and talent to help Canada weather the low economic growth predicted for years ahead.

Finance Minister Bill Morneau unveiled the Liberals’ fall economic statement Tuesday afternoon, saying the infrastructure spending and strategy to attract foreign and private sector investment are what’s needed to help spur growth.

“Today is about the long term,” Morneau told reporters at a press conference Tuesday.

“We’re really talking about how we can a long term impact on middle class Canadians, about how we can make a real difference for people.”

The Liberals now hope to push $95 billion in new infrastructure money out the door over the next 12 years.

The Liberals said their maiden budget in the spring was “phase one” of their infrastructure plan, committing just $11.9 billion over five years to priority projects. Tuesday’s update gave the broad strokes of “phase two” and the Liberals’ long-term plans for a significant public investment in things such as transit, “green” infrastructure and social infrastructure.

Total spending on new and existing infrastructure projects is expected to rise from $13 billion in 2016-17 to $17.5 billion in 2019-20, the end of the Liberals’ first mandate. Over the 11 year timeframe provided by Morneau on Tuesday, total infrastructure spending is expected to reach $186.7 billion.

The Liberals are framing their double-down on infrastructure spending against the backdrop of a sluggish national economy and uncertain international growth.

Since the March budget, private sector forecasters have downgraded their expectations for their Canadian economy, predicting it to grow by 1.2 per cent in 2016-17, down from 1.4 per cent, and just 1 per cent in 2018-19, down from 2 per cent.

Sluggish growth is taking its toll on federal revenues with the budget deficit now expected to be $30.7 billion in the current fiscal year, up from 29.4 billion predicted in the spring. But, in the economic update, the government reveals that it will tap $6 billion in contingency funds in each of the coming five years to reduce the deficit. That will bring the current year deficit down to $24.7 billion.

Morneau was making no promises Tuesday as to when the federal government will balance the budget, saying only the spending is “fiscally prudent.”

But, at the same time, private sector estimates expect the key metric of federal debt-to-GDP ratio to remain relatively stable over that period.

On the infrastructure front, the government is now promising, over 11 years, $23 billion for public transit; $21.9 billion for green projects, such as water and waste water facilities, and $21.9 billion for so-called social infrastructure, such as affordable housing, cultural and recreational facilities.

That spending is up from the spring budget, which committed $3.4 billion over three years for public transit; $5 billion over five years for green projects and $3.4 billion over five years for social infrastructure.

The statement adds two new categories for infrastructure funding: $10.1 billion for projects that assist trade, and $2 billion for rural and northern communities.

The government will create an infrastructure bank, with $35 billion available to help unlock capital investments by pension funds and institutional investors, for example. Some of the funding for the bank will come from the cash previously earmarked for infrastructure projects.

The statement lays out a new economic strategy for Canada on the world stage.

The government will create a hub called “Invest in Canada,” backed by $218 million in funding over five years, to establish a “high-impact sales force” to sell Canada around the globe.

The government intends to make it easier for Canadian and global firms to get foreign workers into the country, promising a two-week turnaround to process visas and work permits for “low-risk, high-skill talent.”

Ottawa will introduce a new work permit exemption for work terms of short duration, applying to periods of less than 30 days in a year or brief academic stays.