I had a great conversation with a banker in Fredericton recently who is a big fan of Finance Minister Blaine Higgs. He told me Higgs is now ready to move his thinking from austerity/cost cutting to efforts to foster economic growth. I know the leader of the Opposition is also travelling the province talking up the need for growth and down the need for more austerity.
What can government really do to foster economic growth?
That is a very long discussion but there are a few short answers. While the small government crowd will cringe, the main way government foster’s growth is through more spending. As Richard Saillant points out in his excellent new book, provincial government spending substantially outpaced the rest of the economy for much of the past 15 years. Because much of that new money was coming in via federal transfer payments you can’t argue “it should have been left in the hands of private citizens to spend as they see fit”.
In fact, the big increase in equalization this year is a major contributor to the modest rise in the economic growth forecast.
But, we need to figure out how to foster private sector growth. There are a number of large scale energy infrastructure projects being proposed and that could bring a welcome boost of economic activity – and tax revenue by the way to folks that are members of C.A.V.E. (Citizens Against Virtually Everything) – a term someone mentioned to me last week.
We also need to figure out urban growth. As I mentioned in a column recently, our urban centres (all of them combined) have had the worst record of job creation of any province in Canada in recent years. Yes, the northern urbans are struggling more than the southern but overall our urban economic and employment growth has been weak and that is holding back our potential.
Finally, back to the mantra, we need far more immigrants. The biggest long term impact on economic growth is population growth. Something like 60 percent of GDP comes from household spending. If the number of people is not increasing, it is very hard to see any path to sustained economic growth.
Susan Holt recently said offhandedly that we have the infrastructure for two million people. I’m not sure if that was based on any kind of formal assessment but I would argue she is just about right. In terms of roads, airports, hospitals, etc. we could probably double our population without a huge expansion of infrastructure (there would certainly be some bottlenecks).
In other words, we should be able to rebalance our demographic mix – bring in lots of younger families – without significant infrastructure challenges.
Ultimately, we need a provincial government that actually wants to foster real growth.
Tim Hudak in Ontario just announced his ONE MILLION JOBS campaign slogan. His government would do things to foster an incremental million jobs over the next 8 years.
Imagine if any New Brunswick government pledged FIFTY-FIVE THOUSAND NEW JOBS over the next eight years.
It took 24 years for the New Brunswick labour market to add the last 55,000 jobs (or at least from 1989 to 2013 the number of jobs increased by 54,000).
I’d take 10k or 15k jobs.