Tuesday, October 6, 2015

The 2015 Elections in Canada

Canadians are electing a new parliament on October 19. Which party to trust to run our country the next four years? Have Conservatives in power the last ten years outperformed the two previous Liberal governments? Could the New Democratic Party do better?

Real GDP Growth Rate, Canada, 1994:Q1-2015:Q1
Real GDP Growth Rate, Canada, 1994:Q1-2015:Q1

Average quarterly real gross domestic product (GDP) growth rate was .84% under Jean Chretien and Paul Martin Liberal governments (Nov 1993-Feb 2006). This is much higher than the overall performance of the economy under the Conservative government of Stephen Harper, .39%.

On the other hand, unemployment rate was higher under Liberals. Average unemployment rate was 8.18% under Liberals versus 7.07% under Conservatives.

Unemployment Rate, Canada, 1993:M1-2015:M3
Unemployment Rate, Canada, 1993:M1-2015:M3

As for the cost of living, its average growth rate, i.e. the inflation rate, is almost the same over the two periods:  16% under Liberals versus .14% under Conservatives.

Government Budget Deficit as a Percentage of GDP, Canada, 1994:Q1-2015:Q1
Government Budget Deficit as a Percentage of GDP, Canada, 1994:Q1-2015:Q1

Another difference between the previous Liberal and the outgoing Conservative governments is the importance of budget deficit they created. Budget deficit as a percentage of quarterly GDP averaged -.5% under Liberals and -.18% under Conservatives.

Do all these mean one party did better a better job than the other? In my opinion, it is difficult to say since the global economic environment was quite different under Liberals and Conservatives. The high unemployment rate Canada witnessed under Liberals was a consequence of the tightening of monetary policy in Canada and the US during the early 1990s crisis. When Jean Chretien took office in November 1993 unemployment rate was already above 10%. Interest rate was extremely high, investment low, and the economy below its production capacity [here]. 
The lower average growth rate Canada experienced under Stephen Harper premiership results from the Great Recession that began in 2008—the worst global recession since World War II. Besides, during the Great Recession, interest rate was extremely low unlike the early 1990s crisis. 

There has been no federal New Democratic Party government. So, I cannot judge them on any previous performance. This party is proposing a fair tax for everyone and lowering retirement age from 67 to 65. A fair tax for everyone, fine! As for the age of retirement, most Canadians already retire at 63 except those who are self-employed who retire, on average, at 66. I doubt what they are proposing is a good idea.

The data used are available here