Seven of 15 Canadian industries experienced an overall decline in investment from 2015 to 2019, according to a new report by the Fraser Institute.
In fact, more domestic industries experienced decreases in capital investment than at any time since 1990 — despite the absence of a major recession.
The oil and gas industry experienced the largest decline in investment at -48 percent over this period.
While much focus has been placed on the devastating implications of this halving of investment into Canada’s energy industry, the evidence indicates that there is broad concern about the outlook for productivity growth and the future competitiveness of Canada’s entire industrial sector, write authors Steven Globerman and Joel Emes.
Other notable declines include agriculture, forestry, and fishing at -19 percent, utilities at -19 percent, and retail trade at -11 percent.
This decreased investment is especially pronounced in asset categories such as machinery and equipment and intellectual property products and are leading to competitiveness problems more broadly. This is significant as all are critical to improvements in productivity and living standards.
Policy changes that improve the investment environment in Canada’s private sector are badly needed. Globerman and Emes highlight measures that would help improve the country’s fiscal and regulatory environment for business investment, including:
- Reducing corporate and personal tax rates,
- Doing more to eliminate regulatory red tape,
- Easing legal restrictions on pipeline investments, as well as other policies that have substantially reduced the profitability of investing in Canada’s oil and gas sector.
