(Vancouver) A report released today by the Canadian Centre for Policy Alternatives says that despite sweeping policy changes by the current government, external factors like low interest rates and US demand continue to drive BC's economic fortunes. The report finds that the economy has recovered from a recession in 2001, only to resume its middle-of-the-road performance of the 1990s.
State of the BC Economy 2004, by economist Marc Lee, gives the provincial economy a check-up using standard indicators in three areas: growth and investment, employment, and earnings. Lee says that while there are some positive signs of life in BC's economy, the statistics do not point to a boom on the horizon.
"The current government brought in dramatic policy changes that it promised would kick-start BC's sagging economy," says Lee. "However, most of the indicators in this report would not be much different if the government had not proceeded with its reforms."
"BC's economy has underperformed for more than two decades relative to our own historical experience and compared to leading Canadian provinces such as Alberta and Ontario," says Lee. "It is too soon to judge the longer-term impacts of the government's policies, but that a sharp turnaround in the economy is unlikely to come anytime soon. The promised payoff from tax cuts, deregulation and privatization hasn't materialized. So far there has been a lot of pain for very little gain."
Economic growth since 2001 has been unspectacular, both in comparison to the rest of Canada and compared to recent BC history. Lee says a big disappointment is continued weak capital investment outside of residential construction. "The fact that investment has not responded to almost $1 billion in corporate tax cuts, $1.5 billion in personal income tax cuts and a slew of deregulation and other initiatives tells us that the government's policy program has not delivered a quick fix."
In terms of employment, a low interest rate environment has been very beneficial to BC, specifically in regards to stimulating the housing market and residential construction. Employment growth improved in 2003, although it is still middle-of-the-road by historical standards. Other employment indicators have changed little in recent years. On a regional basis, most employment gains have been concentrated in the Lower Mainland and Victoria.
BC's hourly wages continue to be tops in Canada. Employment and earnings indicators, however, suggest that there has been little response at a microeconomic level to provincial income tax cuts. Hours worked have continued to decline (in line with recent trends), and the employment rate is little changed from levels in the 1990s.