An annual economic growth rate of three per cent would spur about $45,000 in greater per-person Canadian income after 20 years, according to a study released on Thursday by the public policy think-tank the Fraser Institute.
The Cost of Slow Economic Growth said that from 2011 to 2018, Canada’s real gross domestic product (GDP – the total value of domestically-produced goods and services) grew at an average annual rate of 2.17 per cent compared to approximately three per cent from 2001 to 2010. If Canada maintained an annual economic growth rate of two per cent, the average per-person income ($59,879, in 2018 dollars) would increase by approximately $25,630 in 20 years, to $85,509.
But it said that over the same 20-year period, a three per cent annual economic growth rate would increase the average per-person income (again, $59,879) by approximately $45,150, to $105,029. Increasing Canada’s economic growth from two per cent to three per cent per year would add $19,520 to the average Canadian income by 2039, it added.
“Increased economic growth means improved living standards for Canadians, so economic growth remains an issue worthy of serious attention,” said Steven Globerman, Fraser Institute senior fellow and editor of The Costs of Slow Economic Growth, which the organization says is the first study in a series on economic growth in Canada.
“Given the importance of economic growth to household income in Canada, and to reducing social and political conflict, policy-makers should prioritize faster economic growth.”
The report said real economic growth is the pathway to higher standards of living. The latter encompasses not just more consumption of goods and services but also more leisure, an improved physical environment, better health and, more generally, a superior quality of life for members of society, it said.
“Unfortunately, recent years have witnessed relatively slow economic growth in developed countries, including Canada. While some see the recent slowdown in real economic growth as a cyclical phenomenon and, therefore, amenable to traditional policy tools such as easier monetary policy, others see the slowdown as a manifestation of ‘secular stagnation’ caused by phenomena such as aging populations and an increased reluctance to invest.”
Mario Toneguzzi is a Troy Media business reporter based in Calgary.