2014 oecd economic survey of canada

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Launch of the 2014 OECD Economic Survey of Canada

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2014 oecd economic survey of canada

  1. 1. 2014 OECD ECONOMIC SURVEY OF CANADA 11 June 2014, Montréal, Canada www.oecd.org/eco/surveys/economic-survey-canada.htm
  2. 2. Canadians enjoy high levels of well-being
  3. 3. Exports, especially non-commodities, have been weak
  4. 4. Productivity has lagged but not wages, boosting costs
  5. 5. The current account has not recovered
  6. 6. Business investment has also been weak of late
  7. 7. Canada has had improving labour market outcomes
  8. 8. Monetary policy remains accommodative
  9. 9. Mortgage rates are low and household debt high
  10. 10. • Increase the policy rate as underlying inflation pressures rise to stabilise the inflation rate at the 2% target-range midpoint. According to our Economic Outlook 95 of last month, this implies 4 quarter-point rises during the course of 2015. Recommendation on stabilization policy
  11. 11. Housing spending as a share of income, 2011
  12. 12. House prices have risen sharply in the past 15 years
  13. 13. 1981-85 1986-90 1991-95 1996-00 2001-05 2006-10 2011-13 2013q42 Canada 78.3 94.5 99.3 92.2 99.0 119.6 128.5 130.6 United States 108.6 103.5 96.4 92.9 104.9 102.6 85.3 90.2 Japan 118.2 123.6 116.1 101.2 87.1 73.0 65.2 62.9 Germany 132.1 109.0 106.9 99.6 86.7 77.3 80.8 84.1 France 89.3 93.0 88.9 78.5 100.9 130.7 130.9 127.9 Italy 104.7 85.4 101.0 82.3 99.7 118.2 114.5 108.2 United Kingdom 81.0 102.2 80.2 78.5 113.6 131.3 122.0 124.2 Australia 77.1 86.6 91.5 89.1 117.1 126.3 120.6 126.9 New Zealand n.a. 74.4 81.5 91.7 106.2 131.3 125.2 131.5 OECD 104.7 103.9 98.7 91.7 101.1 103.5 93.9 95.3 Canadian house prices are high relative to income
  14. 14. Prices and affordability vary widely across the country
  15. 15. % of households spending >30% of income on shelter
  16. 16. Mortgage payments/PDI per worker (affordability)
  17. 17. Housing investment as a % of GDP vs pop growth
  18. 18. Household debt/disposable income has risen
  19. 19. Mortgage arrears rates remain low
  20. 20. • The system is different from its US counterpart. • Financial oversight has been tightened post- 2008 • Mortgage securitisation is still not that extensive, though it seems to be still rising. • But most mortgages (and all with high LTV ratios) are insured. • CMHC is a big player, perhaps too big. The housing finance system looks structurally sound
  21. 21. Larger houses despite smaller households
  22. 22. Lower urban densityHigher per capita CO2 emissions
  23. 23. • Tighten mortgage insurance to cover only part of lenders’ losses in case of mortgage default. Continue to increase the private- sector share of the market by gradually reducing the cap on the CMHC’s insured mortgages. • At the municipal level expand low-cost rental housing supply and densification by adjusting zoning regulations to promote more multi-unit dwellings. Housing policy recommendations
  24. 24. Skills mismatch in literacy is low
  25. 25. Earnings premiums have been stable over time
  26. 26. Increase in real earnings Increase in earnings relative to earnings for a high-school graduate Post-secondary certificate/diploma (PSCD) Atlantic Provinces 17.0 2.0 Québec 6.2 1.8 Ontario 5.7 3.3 Prairie Provinces 24.4 0.5 British Columbia 10.2 0.4 Canada 10.4 1.2 University degree Atlantic Provinces 14.0 -0.6 Québec 2.9 -1.4 Ontario 2.0 -0.2 Prairie Provinces 15.0 -7.1 British Columbia 5.5 -3.8 Canada 5.6 -3.2 Memorandum: High-school diploma Atlantic Provinces 14.8 - Québec 4.4 - Ontario 2.3 - Prairie Provinces 23.8 - British Columbia 9.7 - Canada 9.0 - Regional changes in earnings and premiums since 1997
  27. 27. Vacancy rates have risen, but mainly in a few areas
  28. 28. Literacy and numeracy scores for 16-24 year-olds 2012
  29. 29. Gap in literacy scores between 16-24s and 55-65s
  30. 30. Soft skills are important in entry-level hiring
  31. 31. Employer-sponsored training per employee (2010 $)
  32. 32. Publicly funded training expenditure, 2011
  33. 33. • Number of apprenticeships doubled from 2000 to 2011. • But completion rate remained at only 50%. • One barrier is lack of income during in-class training. Another is employer unwillingness to cooperate. • We endorse the new Canada Apprentice Loans and suggest extending Canada Job Grants to apprenticeships. • We also recommend more efforts at harmonizing standards and programs across the country. Raising the apprenticeship completion rate
  34. 34. Temporary Foreign Worker entries/all new immigrants
  35. 35. Interprovincial migration has trended down
  36. 36. Alberta attracts the most interprovincial migrants
  37. 37. Regional employment rate dispersion has converged with the US
  38. 38. • Build on announced new measures to provide better information on expected returns to post-secondary education to improve students’ study choices. • Strengthen the single market for labour by making the AIT dispute resolution tribunal more accessible and expediting its procedures. In addition, continue to work with provinces and territories to harmonise training and certification requirements of all apprenticeship programmes across the country to increase completion rates and inter-provincial mobility for apprentices. • If recent Employment-Insurance reforms do not clearly cut repeat use, adopt experience-rated premiums and enhance opportunities for seasonal workers to retrain. Advice on how to deal with skills shortages
  39. 39. • Continue to implement reforms to slow growth in provincial health-care costs, including patient- or activity-based funding for hospitals, increasing the share of ambulatory care and consolidating input purchases with other provinces. • Establish a single independent budget office for the provinces. Recommendations on fiscal sustainability
  40. 40. Provincial fiscal capacities, 2012/13, CAD per capita
  41. 41. Average government take in oil and gas tax regimes
  42. 42. • Factor in provincial differences in demographics when calculating federal transfers to provinces. • At the provincial level, increase taxes from non-renewable resource development, and raise the share of revenues saved. • Provide clear guidelines for resource companies on how to engage with affected Aboriginal groups so that projects bring long-term benefits to these communities Advice on managing non-renewable resources
  43. 43. Greenhouse gas emissions intensities
  44. 44. Average effective tax rates on CO2 from energy use
  45. 45. • Continue expanding the use of market instruments to price carbon emissions. Work with provinces to ensure coherence of provincial climate-change strategies with international commitments. • Ensure that regulatory objectives for treating waste from oil-sands projects are met. Environmental policy recommendations

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