In The Weekly Wrap, Sean Speer, our editor-at-large, analyses for Hub subscribers the big stories shaping politics, policy, and the economy in the week that was.
Mark Carney is right to prioritize economic growth
Perhaps the most important sentence in this week’s speech from the throne wasn’t about Donald Trump or Canada-U.S. relations or other issues that have defined the Carney government’s early days. It was this: “The Government’s overarching goal—its core mission—is to build the strongest economy in the G7.” At least directionally, it represents a departure from the Trudeau government’s discredited economic philosophy.
For nearly a decade, Canadian economic policy has been shaped by a heterodox idea: that there are no meaningful trade-offs between equity and efficiency. Equality and fairness weren’t treated merely as moral imperatives, but as central drivers of productivity and prosperity. Economic growth could, in short, come from the “heart out”—via redistribution, entitlement expansion, and progressive tax-and-transfer policies.
That assumption has now run aground on the overwhelming evidence. Productivity growth is among the worst in the OECD. Business investment remains 20 percent below 2014 levels. Canada’s GDP per capita has stagnated since 2017. Growth in disposable income has been eroded by inflation and high debt servicing costs.
Enter Prime Minister Mark Carney. His speech from the throne signals a recognition that growth must precede redistribution rather than follow it. It drops the intellectual conceit that deficit-financed social spending is somehow productivity and growth-enhancing. And it tells us that his policymaking should be more grounded in economic orthodoxy.
Of course, there are risks. A big one is that Carney’s economic agenda thus far is mostly limited to natural resources and government spending. That’s not enough. The real test for Canada’s long-term prosperity lies in more entrepreneurship and business formation where we’ve seen high numbers of business exits and low rates of business starts. Yet Carney has said little so far about how he plans to reverse these trends moving in the wrong direction.
There’s also political risk. Carney’s cabinet includes key figures from the Trudeau era. How committed are they still to Trudeau’s economic worldview? Can the new prime minister even build a pro-growth consensus within his own government?
And although the prime minister is saying the right things on economic growth, his emphasize on government playing a “catalytic role” raises concerns about the risk of rent seeking, corporate welfarism, and other problems associated with the state allocating capital and opportunity in the economy.
But for those of us who believe that boosting economic growth is a foundational priority for government—particularly in an era of secular stagnation—this early shift in tone and orientation is a positive development. It recognizes that the law of economics cannot be suspended by good intentions. Old-fashioned economic growth is still a crucial precondition for higher living standards.
Carney isn’t Milton Friedman or even Stephen Harper for that matter. He’s frankly closer to a European social democrat than a hard-core libertarian. But his renewed focus on economic growth is welcome and necessary.
Trudeau’s economic vision may have been intellectually ambitious—and even idealistic. But one of the unintended legacies of his time in office is that it exposed just how wrong it was.
Keep an eye on rising household mortgages
Harold Macmillan’s famous observation that politics is shaped by “events, dear boy, events” may soon apply to Canada’s economic debate. For months, we’ve focused on the risks represented by Donald Trump’s trade actions against Canada. But a new OECD report suggests the bigger challenge may be a domestic one: the growing costs of mortgage payments on household budgets, disposable income, and consumer spending.
The report observes that “Of the mortgages outstanding in the beginning of 2024, more than three-quarters are up for renewal by the end of 2026.” Most will be subject to higher interest rates. One estimate is that the median monthly mortgage payment could rise by over 30 percent in the next two years. The effects will ripple across the economy: disposable incomes will shrink, consumption will slow, and defaults and insolvencies may begin to rise.
This comes at a moment when many Canadian households are already in a fragile financial position. As we outlined in a new essay at The Hub this week, they’re among the financially vulnerable in the OECD based on household debt, debt service ratios, and savings rates. Housing costs —both for owners and renters—are a big part of this story. They’ve outpaced income growth for years.
The coming wave of mortgage renewals, therefore, doesn’t hit a stable foundation; it hits a system already under stress. That makes it particularly dangerous.
One likely policy response is the extension of mortgage amortization periods. While this may ease monthly payments and keep people in their homes, it comes with significant long-term risks. Longer amortizations slow the pace of equity buildup, heighten lender exposure to price corrections, and incentivize higher borrowing levels. They may also undermine the effectiveness of Canada’s mortgage stress tests and increase systemic risk in the financial system. If house prices fall or the job market weakens, the result could be widespread defaults on loans that were only ever affordable on paper.
The key point here is that if the renewal of these mortgages starts to put real strain on households as the OECD anticipates, it will present the Carney government with an excruciating set of choices. Intervene and further distort the housing market, or withhold action and subject households and the economy to real harm.
Whatever the government ultimately decides, one can expect that by late 2025 and into 2026, we’ll be talking a lot more about rising household mortgages.
Prime Minister Mark Carney arrives and greets U.S. President Donald Trump prior to a meeting at the White House in Washington, D.C., Tuesday, May 6, 2025. Adrian Wyld/The Canadian Press.
Rebuilding Canada-U.S. relations is necessary—but it’s a two-way task
The new U.S. ambassador to Canada recently raised concern about rising anti-Americanism in Canada: “both political parties kind of ran on a platform of anti-Trump, anti-America.”
He’s not wrong. There’s a growing strain of anti-Americanism and economic nationalism in Canadian politics that not only risks harming bilateral relations, but will also produce bad policy outcomes.
Yet the ambassador should also understand: this shift didn’t happen in a vacuum.
Canadians have always accepted that we’re the junior partner in the bilateral relationship. What they didn’t expect was to be treated as a target. The Trump administration’s early tariff threats and inflammatory rhetoric about us becoming the 51st state galvanized Canadians. They felt betrayed—and they still do.
President Trump’s threats and provocations have fueled the rise of misguided economic nationalism in Canada, including the fantastical idea that we ought to produce everything “from soup to nuts” within our borders—even a made-in-Canada automobile.
This type of economic thinking is a policy dead-end. It presupposes that policymakers can engineer market outcomes in favour of greater domestic ownership and production with no inadvertent consequences.
We tried it in the late 1960s and 1970s, and it left us poorer and less dynamic. The record is clear: Economic nationalism distorts markets, wastes public monies, and undermines productivity.
Yet as much as one might disagree with it, its sudden spike shouldn’t be a surprise. Its source is rather clear: President Trump.
If Ambassador Hoekstra is serious about reversing these trends, his message should be directed not just to Canadians but to his own president. Rebuilding trust will require more than words in Ottawa. It will require a White House that understands the value of Canada, respects the rules of trade, and treats its closest ally as a partner, not a problem.
Canada’s future lies in North America. But the path forward runs in both directions.
Sean Speer is The Hub's Editor-at-Large. He is also a university lecturer at the University of Toronto and Carleton University, as well…
