Former Liberal finance minister: Recessions lead to changes in government

In the wake of Canada’s gross domestic product growing by 0.1 per cent in July, former finance minister John Manley says many uncertainties in the global economy remain that can affect Canada. ‘It’s very hard for a government to gain strength during a recession,’ he said.

Canada’s economy grew in july but just barely according to statistics canada gdp rose by 0.1 percent economists were expecting a decline but they haven’t turned rosie for future months according to capital economics strong gains in the natural resource sector will prevent the economy from contracting this quarter but it looks increasingly likely that gdp growth

Will turn negative in the coming quarters what might that mean for politicians tasked with managing a possible recession john manley is a former liberal finance minister and a senior business advisor with bennett jones hi mr manley good to see you thank you that gdp number for july it’s not great 0.1 but it seems to have beat uh expectations by a little bit do you

See the glass as half full or half empty well it’s got a little bit of remaining fluid in it for sure uh whether it’s half full i wouldn’t i’m not sure i’d go that far simply because there are so many uncertainties out there not just in the canadian economy but in the global economy right now including of course what’s happening in the united kingdom in terms of

Their financial markets uh what is the u.s fed federal reserve planning to do and then just throw in an added measure of energy and security in europe and war in ukraine and chinese economic challenges and you’ve got a toxic mix and i guess it’s out of that mix then i i put to you there are so many forecasts right now that that are predicting some sort of recession

How how deep the recession goes seems to seems to be the the subject of conversation do you think that that it is inevitable that there will be some type of recession that canada experiences so very often if the united states goes into recession we do as well and so uh the the language from the federal reserve has been a great deal i’d say more aggressive than

See also  6 principles of personal finance and budgeting for 2022

Has the language from the bank of of canada um and it feels to me as though with expectations of the federal reserve rate going over four percent that they are driving their economy into a slowdown and that’s probably going to affect us now good news in this and that’s why there is still some fluid in the glass uh is that first of all we we do have shortages in

Terms of the workers so the impact on employment is going to be less and also if the bank account is a little less aggressive in raising interest rates than i think uh we’ll see the canadian dollar continue to fall against the us dollar and that helps our export trade quite a bit i want to pick up on that is your expectation that the bank of canada is a little bit

Less aggressive because there is also uh some focus on on them of course as well and some kind of back and forth about whether they’re being too aggressive and are they might send us into a recession itself by by hiking rates so much do you expect that to tone down a bit i think i think the rhetoric is already toned down somewhat especially if you compare it to

Some of the other central banks around the world but also i think they’re dealing with a different situation in canada um to some degree and i regret to say this we are we are price takers when it comes to interest rates and uh so that when the u.s raises its rates usually that means the longer term rates are going to go up the bank of canada only really controls

Very short-term rates and if investors are looking for higher returns and the longer bonds and the yields go up well that’s going to affect us uh directly it’ll affect the cost of money here and count it’ll pull up those other rates including uh personal lines of credit uh credit uh that that are out there as well as mortgage rates so it’s not all about the bank of

Canada here it’s about international financial condition and a little bit about i think for canadians watching and certainly canadians watching this show in particular what what the federal government decides to do turn back the clock two decades imagine you’re still in the finance minister’s office right now you’re looking down at the possibility of a recession

See also  Bank of America success story | American multinational financial services company | Brian Moynihan

Let’s say six months from now or or even sooner of some type of recession of some type what’s what’s going through your mind at that juncture uh recessions lead to changes in government uh we saw it repeatedly over uh over the years uh it’s very hard for a government to gain strength during a recession because the you know people are hurting and you know we’re

Seeing to some degree uh displaying played out in the united states right now where or in the united kingdom rather where uh the bank of england is trying to raise rates and the government is is producing more economic stimulus inflation is quite a bit higher there than it has uh so far risen to in canada or in the united states and you’ve got this push and pull

Between fiscal policy on the one hand and monetary policy on the other hand that is a bad situation to be in the trouble with that she is the united kingdom is not like this isn’t a small uh regional economy we’re talking about we’re talking about a g7 economy which can have uh implications for the broader global economy as well so so then uh from your perspective

What is the is it inevitable that there be a change of government or that this current government face i guess nothing is inevitable but that they face that much of a challenge and what’s your assessment of i guess where things stand right now and i’ll tell you why i’m asking very very bluntly right this is the subject of question period every day this is what the

New opposition leader the new conservative leader pierre palia focuses on day in and day out uh and i’m wondering if you think it’s resonating if you think it might work if it’s a vulnerability for the liberals or if you think their their counter narrative is working well i think that you know this goes back to bill clinton running against george h.w bush you know

See also  10% Cash Back On A Tesla? - M1 Finance Credit Card FIRST LOOK!

It’s the economy stupid and canadians have had a pretty benign economy for quite a long time now we yeah we had a rough patch through a pandemic but nobody blamed the government for that and i think that most canadians felt that the government’s response to the pandemic although some of us curmudgeons as you know complained a little bit about the degree that they

Were they were spending during it but most canadians i think would say they did what had to be done in the circumstances but now the the you know the shoe’s on another foot right now and people are having having to face inflation which they have not seen in a generation or two uh to a long time since we fought those battles with inflation back in the in the late

80s and early 90s and where in where recessions were actually brought on in order to bring inflation under control and so we’re getting a lot of quite frankly economic gibberish now about uh you know oh just you know let interest rates go uh inflation you know will come under control and inflation inflation is what destabilizes an economy the people can’t trust

The currency they can’t trust their savings anymore um then you can’t have investment you can’t have economic growth so getting back getting our our hands on inflation getting it down to the level that canadians have confidence in and are not constantly feeling they’ve got a hedge against four percent six percent eight percent in the uk 10 percent uh is a very

Important step so i i think that the the government will pay a price for this because they are on the defensive i think some of the solutions that i’ve heard advocated by both the left and the right uh would not be particularly helpful in these circumstances okay mr manley i’ll leave it there thank you as always for your time and your insights pleasure bashi

Thank you thanks power and politics see more of our show by subscribing to the cbc news channel or click the link for another video

Transcribed from video
Former Liberal finance minister: 'Recessions lead to changes in government' By CBC News