Housing crisis. Foodflation. Record gas prices. Canada is at a crossroads, and it all comes down to the P word …

The signs are there for everyone to see: story after story of unaffordable homes, expensive grocery runs, crowded emergency rooms, record high gas prices, and small businesses struggling to keep their doors open. If we continue down this path, we risk falling behind, ultimately lowering the standard of living for Canadians.

To be clear: Canada is not broken. It’s a country blessed with natural resources, a highly educated workforce, a diverse population, and a strategic geographical location. How this translates to an environment where businesses thrive, however, relies on government policies. Unfortunately, many of these policies have restrained business growth, hindering their capacity to invest, and stifling their ability to make the economy more productive.

Indeed, the main culprits behind Canada’s economic sluggishness are dwindling business investment and stagnant productivity. In fact, business investment has declined for six of the last seven quarters.

For example, private investment on machinery and equipment is down six per cent since the last quarter of 2019 — a few months before the pandemic. In this area, we have never truly recovered.

Canada is pushing a shopping cart with broken wheels

In addition, labour productivity, measured as the amount of output we produce per hour worked, has declined for six consecutive quarters. Unit labour costs — that is, the cost of wages and benefits a business pays its workers to produce one unit of output — have jumped 21 per cent since the last quarter of 2019. Bottom line: we’re working longer and getting paid more but the output remains the same.

In short: Canada is failing to live up to its potential.

Small businesses offer a clear insight into why we’re falling short. According to the Canadian Federation of Independent Business’s (CFIB) Monthly Business Barometer, two-thirds of Canadian small businesses cite tax and regulatory costs as their top cost constraints, hindering their ability to invest and expand. To put it simply, Canada is pushing a shopping cart forward with two broken wheels, leaving Canadians struggling to keep pace with our international counterparts.

While governments need taxes to fund essential services, it’s unreasonable to overtax and overregulate businesses for supplying goods and providing services that Canadians need. By producing more goods and services, growth provides more opportunities for workers, incentivizes businesses to invest, lowers prices for the things we all need, and increases government revenue to fund essential services.

When we produce more, everyone benefits. We need policies that drive more production, not less.

So, what can governments do? The economy is running on old operating software that continues to freeze and crash, to everyone’s detriment. We need more than just a reset, but an update to achieve economic growth using the proven recipe of low taxes, reasonable regulations, and efficient spending practices.

One path leads to stagnation, the other to progress

This update means governments must address practices that are holding back business growth and investment. For example, as governments continue to borrow, they have taken resources that would have otherwise been used to start new businesses or expand existing ones. In fact, the federal and provincial governments have collectively accumulated $426 billion in total net debt between 2019-2020 and 2023-2024 — a 24 per cent jump.

While many countries, including the U.S., have taken on significant pandemic-related debt, they have not seen a productivity stagnation Canada has experienced both before and since the pandemic. Compared to the U.S., Canadian productivity is down nine per cent between 2000 and 2022, falling to roughly 72 per cent of that of the U.S.

In addition, property taxes and payroll costs are stifling business growth. For instance, property taxes are rising in Toronto and Halifax by around 10% this year while high payroll taxes, particularly in British Columbia and Quebec, add more than $5,000 to the cost of hiring an employee.

Lastly, sales tax policies in provinces like B.C., Saskatchewan and Manitoba are making it tough for businesses to invest in the machinery and equipment they need to grow. Across Canada, the cost of doing business is rising and it will inevitably create some long-term consequences that future generations will have to endure.

We have come to a fork in the road: one path leads to stagnation, the other to progress.

Embracing economic growth isn’t a departure from our values; it’s a reaffirmation of our commitment to making life prosperous for Canadians. Nurturing an environment where businesses flourish and ideas thrive isn’t just about economic prosperity; it’s a testament to our core identity.