The document summarizes the 2019 Federal Budget presented by the Government of Canada. Key points include: - The global economy is slowing down and growth is moderating in Canada and the US. - The US economy remains healthy but is expected to slow in 2019-2020. Housing starts in the US remain well below historical levels. - The Canadian economy had weak growth in late 2018 and faces risks from a softening global economy and high household debt levels. - The budget projects modest deficits and a stable debt-to-GDP ratio over the next few years and focuses on initiatives around housing, skills training, and infrastructure. However, it does little to address competitiveness issues.

1. www.bcbc.com | @bizcouncilbc
2 0 1 9 F E D E R A L B U D G E T
MARCH 20, 2019
K P M G F E D E R AL B U D G E T B R E AK FAS T
VAN C O U V E R , B . C .
Jock Finlayson, Executive Vice President and Chief Policy Officer
jock.finlayson@bcbc.com
PRESENTED TO THE

2. G LO BAL E CO NO M Y I S CO O LI NG
2
Source: BMO Economics for forecasts; IMF for other years.
3.7% 3.6%
3.3% 3.2%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
2017 2018 2019 2020
Growth in Total Output
Average
Growth,
2000-2015

3. G RO WTH M O DE RATI NG I N CAN A D A AND U. S .
3
3.0
1.8
1.3
1.7
2.2
2.9
2.3
1.7
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
10 11 12 13 14 15 16 17 18e 19f 20f 10 11 12 13 14 15 16 17 18e 19f 20f
Real GDP growth, %
Canada U.S.
e=estimate f=forecast
Source: IMF World Economic database for history, BMO Economics for forecasts.

4. U. S . E CO NO M Y HE ALTH Y, BUT S E T TO S LO W I N 2 0 1 9 - 2 0 2 0
4
• Growth projected at ~2.3% this year, down from almost 3% in 2018
o current expansion is the 2nd longest on record
o US economy has benefitted from ‘sugar high’ provided by tax cuts and increased gov’t spending
• Employment continues to climb… as the labour market tightens further
o unemployment rate near a 40 year low – heading for 3.5% in 2019
• Housing starts have been choppy, amid higher prices, escalating building costs,
and relatively slow household growth
• Business investment is increasing – aided by recent tax cuts/reforms
• The Federal Reserve has modified its stance, suggesting at most only
1-2 additional interest rate hikes over the course of 2019-20

5. U. S . S TAR TS WE LL BE LO W 1 9 9 7 - 2 0 0 6 LE V E LS
5
f=forecast
Source: U.S. Census Bureau, Department of Housing and Urban Development,
average of forecasts from BMO, CIBC, TD, RBC & Scotiabank for projections.
0
500
1000
1500
2000
2500
94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19f 20f
U.S. housing starts, 000s
two or more units single units

6. U. S . P O P UL ATI O N G RO WTH THE S LO WE S T S I NCE 1 9 3 7 !
6
• Since mid-2016, America’s population has been growing at an average rate of
0.7% per year – the slowest pace in 8 decades
• In contrast, Canada’s population is rising by 1.3-1.4% per year
• This demographic difference should contribute to faster growth in Canada’s
working-age population compared to the U.S., even though America’s population
remains younger (average and median age)

7. CAN A DI AN E CO NO M Y: BUM P S AHE A D
7
• Growth essentially stalled in Q4 2018, creating a very weak hand-off into 2019
• Solid job creation, despite signs of a weakening economy
• Household consumption and continued high levels of housing starts
(214,000 nationally last year) have been the key factors sustaining aggregate demand
– but both are expected to lose steam in 2019-20
• Don’t overlook the impact of population growth: Canada leads the G7 and is near
the top in the OECD, fueled by international immigration into urban areas
• Risks on the downside – softening global economy, Canadian household debt
burden, ongoing adjustments in housing markets, oil prices, increased
intergovernmental conflict and tension

8. 8
CAN A D A: I M M I G RANT ARRI VALS *
* Permanent immigrants only Source: Statistics Canada; TD Economics.
252,000 260,000 271,000
297,500
286,000
311,000
331,000
2013 2014 2015 2016 2017 2018 2019
(target)

9. 80
90
100
110
120
130
140
150
160
170
180
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Canadian household debt to disposable income, %
RE CO RD HO US E HO LD DE BT ACC UM UL ATI O N
9
Latest Q4 2018.
Source: Statistics Canada, CANSIM table 378-0123.

10. BUT… E V E N WI TH RE CO RD DE BT, DE BT- S E RV I CE RATI O S
LO O K M AN AG E A BLE
10
15
20
25
30
35
40
45
50
91 93 95 97 99 01 03 05 07 09 11 13 15 17
Thousands
Canadian interest paid, billions $
mortgage
non-mortgage
10
Latest Q3 2018. Source: Statistics Canada, Table: 11-10-0065-01.
2
3
4
5
6
7
8
9
10
91 93 95 97 99 01 03 05 07 09 11 13 15 17
Debt service ratio
mortgage
non-mortgage

11. CAN A DI AN I NTE RE S T RATE S … V E RY LI TTLE ‘ UP S I DE ’
11
Source: Bank of Canada; BMO Economics for forecasts.
10 yr bond yield:
2.05% Q4
3 month
T Bill:
1.85%
Q40.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Overnight rate
10 year bond yields
3 month T bill
Selected Canadian interest rates, %
Overnight
rate:
1.83% Q4

12. O UTLO O K FO R THE LO O NI E
12
Latest: January 2019
Source: Bank of Canada, noon rate.
0.65
0.70
0.75
0.80
0.85
0.90
0.95
1.00
1.05
1.10
04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20
U.S.$ per Cdn$, monthly averages with quarterly forecasts
history
Scotiabank
RBC
CIBC
OECD PPP estimate
40-yr average

13. CAN A D A’ S S HRI NKI NG FO O TP RI NT I N G LO BAL M ARKE TS
( S H AR E O F W O R L D M E R C H AN D I S E E X P O R T S )
13
Source: Canadian Manufacturers and Exporters.
4.3%
2.4%
2000 2017

14. CAN A D A’ S LAG G I NG E X P O RT P E RFO RM AN CE
( A V E R A G E A N N U A L I N C R E A S E I N T H E V A L U E O F E X P O R T S * , 2 0 0 0 T O 2 0 1 7 ,
M E A S U R E D I N U . S . D O L L A R S U S I N G P P P E X C H A N G E R A T E S )
14
* Merchandise exports
Source: Canadian Manufacturers and Exporters.
6.0%
7.2%
5.9%
4.1%
2.5%
0%
1%
2%
3%
4%
5%
6%
7%
8%
Total World
Exports
S. Korean
exports
German exports U.S. exports Canada exports Canada non-
energy exports
1.0-
1.5%

15. 15CAN A D A’ S P E RFO RM ANC E I N THE 2 0 1 8 WO RLD E CO NO M I C FO RUM
“ G LO BAL CO M P E TI TI V E NE S S RE P O RT”
Source: World Economic Forum, The Global Competitiveness Report 2018.

16. “ M O S T P RO BLE M ATI C FACTO RS ” FO R DO I NG BUS I NE S S I N CAN AD A
( B A S E D O N A 2 0 1 7 S U R V E Y O F C A N A D I A N E X E C U T I V E S )
16
Source: World Economic Forum, Executive Opinion Survey 2017.
19.3
15.8
14.4
9.7
9.1
7.9
5.8
5.8
4.5
2.9
1.7
1.2
1.2
0.7
0.0
0.0
0 5 10 15 20
Inefficient government bureaucracy
Tax rates
Insufficient capacity to innovate
Inadequate supply of infrastructure
Tax regulations
Policy instability
Restrictive labour regulations
Access to financing
Inadequately educated workforce
Poor work ethic in national labour force
Government instability/coups
Inflation
Foreign currency regulations
Corruption
Poor public health
Crime and theft
Note: From the list of factors, respondents to the World Economic Forum’s Executive Opinion Survey were asked to select the five most problematic factors for
doing business in their country and to rank them between 1 (most problematic) and 5. The score corresponds to the response weighted according to their rankings.

17. M E AS URI NG CAN A D A’ S CO M P E TI TI V E NE S S
( D R AW N F R O M A 2 0 1 8 S U R V E Y O F C AN A D I A N C E O s )
17
Source: Business Council of Canada.
47.8%
20.0%
18.9%
7.8%
5.6%
Regulatory burden
Availability of talent
Taxes/tax rates
Quality/capacity of infrastructure
Trade barriers/NAFTA/U.S. protectionism
Of the following factors, which is most likely to affect your company’s Canadian investment plans?

18. BUDG E T 2 0 1 9 : M AI N FO CUS ARE AS
18
• Fiscal deficits are here to stay…but with a stable debt/GDP ratio (assuming no
recession in next 5 years)
• New initiatives to assist first-time home-buyers and expand the rental housing stock
• Programs to enable workers to pursue mid-career training/skills upgrading
• Lower interest rates on student loans, plus a significant push forward on work-
integrated learning
• A rhetorical commitment to review and modernize some areas of government
regulation…but not much action
• Little to address Canada’s eroding competitiveness or the weakness in Canadian
capital formation, beyond the measures announced last fall
• Initial steps to advance a national pharma-care program
• A handful of new ‘green’ initiatives (notably subsidies for electric vehicles)

19. E CO NO M I C AS S UM P TI O NS FO R CAN AD A
19
Source: Federal Budget 2019.
2018 2019 2020 2021
Real GDP Growth (%) 1.9% 1.8% 1.6% 1.7%
Nominal GDP Growth (%) 3.8% 3.4% 3.5% 3.7%
Level of Nominal GDP ($) $2.22 tril $2.30 tril $2.38 tril $2.46 tril
Avg. Unemployment Rate 5.8% 5.7% 5.9% 6.0%
3-month T-bill rate 1.4% 1.9% 2.2% 2.3%
10-yr gov’t bond rate 2.3% 2.4% 2.7% 2.8%
Oil prices, WTI (US$) $66 $59 $60 $61

20. RE V I S E D FE DE R AL FI S CAL P LAN ( C$ BI LLI O NS )
20
* Rounded to nearest whole number. Source: Federal Budget 2019.
2017/18 2018/19 2019/20 2020/21 2021/22
Revenues 311.2 332.2 338.8 351.4 366.7
Expenditures 330.2 347.1 355.6 368.2 378.4
Program Spending 308.3 323.5 329.4 339.7 348.3
Public Debt Charges 21.9 23.6 26.2 28.5 30.2
Adjustment for risk - - -3.0 -3.0 -3.0
Budgetary Balance -19.0 -14.9 -19.8 -19.7 -14.8
Net Federal Debt* 671 685 705 725 740

21. FE DE R AL DE BT, $ BI LLI O NS AND % G DP
21
f = forecast.
Source: Fiscal Reference Tables and 2019 Federal Budget for projections.
15
20
25
30
35
40
45
50
0
100
200
300
400
500
600
700
800
00-01
01-02
02-03
03-04
04-05
05-06
06-07
07-08
08-09
09-10
10-11
11-12
12-13
13-14
14-15
15-16
16-17
17-18
18-19f
19-20f
20-21f
21-22f
22-23f
Debt as a
percentage
of GDP
(right scale)

22. A FE W BUDG E T M E AS URE S O F I NTE RE S T
22
• CMHC First Time Home Buyer Incentive….5% of the purchase price of an existing
home (10% for a new home), for first-time buyers
o only for those with household incomes below 120K
o maximum mortgage and incentive amount no more than 4x household income
o impact will be on the low-end of the market (below 500k)
• Increase tax-free withdrawal from RRSPs for first-time home buyers, from 25k to 35k
• $10 billion over 9 years to support rental housing development
• Commitment to expand broadband access beyond urban centres
• Additional support for market development, innovation and commercialization in
the Canadian forest sector ($251 million over 3 years)

23. A FE W BUDG E T M E AS URE S O F I NTE RE S T
23
• Creation of a new Economic Strategy Table for tourism, along with new funding
($58 million over 2 years) to expand/improve tourism-related infrastructure and new
tourism offerings
• Time-limited subsidies for the purchase of electric vehicles (how will this intersect
with B.C.’s new similar subsidy?)
• Canada Training Benefit (CTB) – a tax credit for skills upgrading, accumulating at
$250 per year to a maximum of $5,000 over a lifetime. Plus, enhanced income support
from the EI program for those who use the CTB
o for those aged 25-64, up to 150k of earnings
• Continued focus on reconciliation and investing in Indigenous communities to narrow
socio-economic gaps (another $4.5 billion over 5 years; note that total federal spending
will reach $17 billion by 2021)
• Immediate $2.2 billion transfer to municipalities for infrastructure, via the federal
Gas Tax Fund

24. CO NCLUS I O N: O V E RALL E CO NO M I C I M PACT
24
• The Budget is unlikely to have a measurable impact on the trajectory of the Canadian
economy…nor on the dollar, bond yields or equity markets
• At the margin, the Budget can be viewed as slightly “growth-positive,” but the
effects will be too small to be noticed
• Nothing in Budget 2019 will cause global capital markets, investors or corporate
decision-makers to alter their perceptions of Canada’s attractiveness as a place to
invest or do business
• An important caution: Ottawa is banking on a benign future state of the world....
no U.S. recession, no further significant weakness in energy markets, a favourable
resolution of the US-China trade conflict, no disorderly BREXIT, etc. Sunny days,
apparently, lie ahead!