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Canada’s Federal Election: Post-election government will center efforts on economic investment and stimulus spending
14 September 2021John Raines, Ph.D.
Polling numbers in the early weeks of the election campaign
suggest a close race, with either a slight Liberal Party (Liberals)
or Conservative Party (Conservatives) minority victory being the
most likely outcome.
The Conservatives, led by Erin O'Toole, have been gaining ground
steadily in the polls and have taken the lead slightly over the
incumbent Liberals. However, even if the Conservatives win the
popular vote, as they did in 2019, geographic constraints are
likely to work against them, reducing the probability of them
gaining a majority (over 170 seats) in the next parliament.
Political candidates during the 2021 election cycle have been
targeted by anti-vaccination and anti-lockdown protests, with at
least one campaign stop for Liberal leader Justin Trudeau being
cancelled over security concerns.
A re-elected Liberal government would be likely to tighten
existing corporate tax laws, implement more stringent measures to
curb greenhouse gas (GHG) emissions, and increase tax revenue from
digital services companies and financial institutions to fund its
coronavirus disease 2019 (COVID-19) economic recovery strategy and
implementation of a universal childcare plan.
A Conservative win would result in the modest loosening of GHG
emissions restrictions but with maintained plans to impose a 3%
digital services tax on gross revenues in Canada.
Outlook and implications
Despite the increased divisiveness of Canada's election
campaign, as evidenced by vocal special interest groups targeting
campaign stops, any government make-up will center efforts on
Canada's need for post-COVID-19 economic investment and stimulus
spending. Common themes across all parties include spending on
green technologies, job stimulus, greater ease in accessing
employment insurance, and affordable housing construction. As such,
no government composition is likely to eliminate deficit spending
over the course of its next mandate. Large corporations that are
perceived to have profited from the pandemic, such as financial
institutions and digital companies, are likely to see the
implementation of new temporary tax measures in order to finance
those spending commitments and address Canada's growing federal
budget deficit.
A Liberal-led or coalition government is expected to pursue
policy continuity, implementing existing promised programmes from
previous election platforms and the 2021 federal budget presented
in April. Existing vaccination requirements for travel and federal
employees are likely to be maintained and strengthened. Trade and
diplomatic relations with China are likely to remain strained, with
the Conservatives being slightly more likely to pursue a more
confrontational approach, including military exercises with allies
to strengthen the Canadian presence in the South Pacific.
Policy change is likely to be greatest in the case of a
Conservative government with a strong minority or majority win.
This would include a rollback of emissions targets and
carbon-pricing policies, a shift in approach on federal childcare
support to a subsidy or a tax-break system, and an easing of
environmental permitting and remediation requirements for
hydrocarbon, forestry, and agribusiness sectors. This approach is
likely to result in rising social unrest for resource development
sectors and at strategic infrastructure sites, increasing the
frequency of operational disruption, particularly if the
Conservatives pursue related criminal code changes, outlawing
blockades of ports, rail lines, and resource construction
sites.
Posted 14 September 2021 by John Raines, Principal Global Risks Adviser and Head of North America, Economics & Country Risk, S&P Global Market Intelligence
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