It’s time to ring the economic alarms, Canada

This metric measures two things: productivity and individual economic well-being. Over the last three years, Canadians have produced less, and we have experienced a sharp decline in our standard of living. Here is an interesting exercise. Imagine that after the pandemic, the Canadian economy had recovered its pre-COVID-19 growth rate in the real GDP per capita of around 2.5 percent. This was the rate at which GDP grew from 2016 to 2019. It is also the minimum growth rate most economists require to maintain employment consistent with low inflation. If the country had returned to that growth rate, the real per capita GDP in 2025 would be approximately $74,000, rather than the current $66,000. It is also possible to see the wealth “hole” created by the stall in the Canadian economy since September 2022. Figure 2 shows the difference between the potential (annual real GDP growth of 2.5 percent) and the actual, with the red area showing the wealth “deficit” created by the inability of governments, businesses, and households to sustain a dynamic economy. Note that these data do not include the impacts of tariffs imposed by U.S. President Donald Trump. Canada faces a complex challenge. The throne speech of 2025 and other major project announcements offer a buffet of tax cuts and spending increases. These partly respond to campaign promises that require increased spending. At the same time, the reduction in taxes on the middle class, the elimination of the carbon tax, and GST exemptions on new home sales all raise pressure on income and corporate taxes to support public expenditure. Recent pronouncements suggest that Prime Minister Mark Carney is committed to implementing structural changes, particularly embodied in Bill C-5, which attempts to reduce inter-provincial trade barriers and expedite significant infrastructure development. However, there is another critical factor in determining the health of our economy: investment, or as economists prefer to label it, capital formation. Figure 3 shows that real per capita capital formation has been in free fall since 2022. We are investing less per capita in 2025 than we did in 2003. And we wonder why our health-care system and roads are in such disrepair. Like per capita GDP, capital formation is both an input to and an outcome of a growing economy. Much of the current punditry focuses on how the federal government’s fiscal and monetary policies must coordinate to stimulate investment. I wish it were that simple. Provincial and municipal governments account for the bulk of public sector spending, and their policies, especially in housing, are critical to promoting construction. Overall, these are not just academic figures. The increasing impoverishment of Canada steals the future of our children, imperils our ability to finance infrastructure, and weakens our capacity to assert our values in an increasingly hostile world. It is time to ring the economic alarms—loudly.