The projected growth for B.C.’s economy over the next two years should be consistent but not robust, says one of the leading economists in the province.
But there are several underlying issues that pose some risk to projected stable growth, says Jock Finlayson, executive vice-president of the Business Council of B.C.
Finlayson points to new taxes introduced by the NDP provincial government on the housing industry, a continued under-performance of capital investment and growth in the business sector and need to address Canada’s weakening overall competitiveness in the global export market.
While clean and environmental-friendly technology may be the growth sector of the future, Finlayson said green-thinking politicians in Ottawa and Victoria are losing sight of the importance resource-based industries play in our current economic fortunes.
“The Canfor forest products company had more exports out of B.C. last year than the entire clean technology industry did across Canada,” Finlayson said.
“It’s worth noting that lumber made up 40 per cent of B.C.’s exports 20 years ago, and it was 37 per cent in 2017.”
Finlayson offered his insights on our national and provincial economies as the keynote speaker at the Urban Development Institute luncheon at the Coast Capri Hotel in Kelowna on Wednesday.
While politicians in Ottawa and Victoria can’t talk enough about clean technology growth, Finlayson said the reality for our economy is resource based industries are a far more significant economic driver, and the lack of attention paid to that reality is disconcerting.
“If you look to our export growth, half of our exports come from resource-based industries. In B.C., that mark rises to 75 per cent. And another 20 per cent comes from the automotive manufacturing sector.
“So that makes up 70 per cent of Canada’s exports, while clean environment technology exports amount to 3.7 per cent, yet that is where politicians in Ottawa spend all of their attention.”
Resource extraction, he added, tends to also create larger job creation opportunities of high-paying job in the business sector, dispelling what he called the popular myth that small business is the backbone of the economy.
“Small business plays a role to be sure, but what causes more impact on economic growth is companies with 50 or more employees. The reality is in small business half of those businesses that start up don’t last past five years, and 80 per cent of those that do won’t grow significantly in employees.”
“To get the economy to move, you need more of those mid-size and larger firms to be hiring people. When the size of the business is larger, earnings for employees tend to go up. We need to see an environment for growth created by governments to encourage that, but it’s not happening.”
Finlayson said B.C.’s performance is poor in terms of corporate capital infrastructure investment, which is mirrored by similar concerns across the country.
“That is damaging our competitiveness and potential capital investment is being redirected to other countries. For us to accelerate business growth, we need to find ways to encourage capital infrastructure investment,” he said.
Finlayson said a quartet of new taxes on B.C.’s real estate industry generates concern for him because the housing industry has been an influential factor in the province’s strong 2017 economic showing.
“The proposed new taxes, and the speculation tax details that have yet to be ironed out, are a case of ready, aim, fire on the housing side. There is the potential here to destabilize a sector that has seen unprecedented growth in recent years, coupled with already tighter mortgage qualification rules and expected interest rate increases.
“I understand the desire to deal with the affordable housing issue, but these new taxes to create revenue for the government may have an undermining effect if housing development drops off.”
He said for Kelowna, the housing and financial sectors have created a job creation surge over the last 18 months, preceded by five to six years of flatlined job growth.
“What we call the housing complex sector, building new homes, home renovation and financial services related to the housing industry, have been a driver for your local economy.”
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