With contributions from Vivien Lee, Sheena Khan and Aaron Ma

The U.S. Federal Reserve (Fed) and Bank of Canada (BoC) restarted their rate cutting cycles in September, having been on pause since December and March, respectively. Both moves were widely expected. The Fed looks set to deliver a series of further cuts over the next year. Additional easing by the BoC is likely to be more limited, however, given an already neutral-to-accommodative stance.

Most major central banks are cutting interest rates

As of 09/18/2025. Dotted lines indicate futures pricing. Sources: Bloomberg, RBC GAM

Fed Chair Powell described September’s 25 basis point (bp) cut as “risk management” given growing downside risks to the labour market. Fed officials penciled in a bit more easing than previously envisioned, even as growth forecasts improved slightly and inflation is seen taking longer to return to 2%. The Committee is split on whether further rate cuts will be appropriate at the remaining two meetings this year.  But it appears there’s enough support  from Fed officials for two more cuts this year and one in 2026. The futures market is convinced the doves will win out. We land somewhere between the dot plots and the market expectation.

Politicization remains a serious concern with Trump advisor Stephen Miran joining the Fed’s board in September, on temporary leave from his position as chair of the president’s Council of Economic Advisors. Miran dissented in favour of a larger 50 bp rate cut in September and was presumably the outlier wanting to see the policy rate below 3% by year end. But two other Trump appointees who dissented in favour of a cut in July voted with the majority this time around, easing worries that an uber-dovish group of Trump appointees will steer the committee in an overly stimulative direction. Meanwhile, committee member Lisa Cook was in attendance in September while her firing by Trump continues to work its way through the courts.

In Canada, it was the combination of a softening labour market, stabilizing inflation and reduced upside risks to prices that prompted the BoC to follow through on its easing bias with a 25 bp cut in September. It was generally thought that the central bank wouldn’t come off the sidelines for a single rate cut. Recall, the BoC hiked at back-to-back meetings when it resumed its tightening cycle in mid-2023. However, Governing Council has dropped its easing bias and gave no explicit hints on future moves.

Still, the market anticipates another rate cut by year end, and then the chance of an additional cut in 2026. We are inclined to think the Bank of Canada could ease slightly more than the market currently expects given the existence of substantial economic slack and ongoing economic damage.

In contrast, the Bank of England (BoE), European Central Bank (ECB) and Bank of Japan (BoJ) all held their policy rates steady in September. Looking across G7 central banks, it’s hard to find a common thread – each seems to be at a different point in its monetary policy cycle:

• The Fed has resumed rate cuts, moving toward a more neutral policy stance but at an uncertain pace given tension between the two sides of its dual mandate.

• The BoC resumed rate cuts after a three-meeting pause, shifting to a slightly accommodative stance but with limited guidance on further easing.

• The BoE looks set to slow its already gradual pace of easing amid stubbornly high inflation and wage growth. It could remain on hold into 2026 and end this year with the highest policy rate in the G7.

• The ECB appears content with its current neutral policy stance. The market expects this will be maintained for the foreseeable future.

• The BoJ’s already gradual rate hiking cycle is being delayed by political uncertainty, but another rate increase is expected later this year or early next year.

Overall, the move to a generally less restrictive monetary policy stance – with the Fed’s easing cycle carrying outsized influence – supports global growth. Upward pressure on long-term bond yields amid lingering inflation worries and growing concerns about sovereign debt are blunting the stimulative effect of rate cuts. At the same time, tight credit spreads are helping to contain borrowing costs for businesses.

-JN

The U.S. federal fiscal year ends on September 30 – a date that is nigh upon us. The risk that politicians fail to secure a budget and thus that a significant fraction of the federal government is shut down for a period of time is mounting. It is now arguably more likely than not.

Polymarket assigns a 65% chance of a government shutdown by October 1 – a probability that has risen substantially in recent days. The Good Judgement Open probability of a shutdown is a more sedate 39%, but this has also risen markedly in recent weeks. We put a greater weight on the Polymarket probability given the fact that actual money is being wagered on the platform.

A major reason for the spike in shutdown likelihood is that efforts to secure a stopgap spending bill that would delay the reckoning until late November failed when put to a vote on September 19. The Republican-dominated House of Representatives managed to pass the proposed extension, but the Senate did not. Two Republican Senators voted against the bill and others abstained. The Democratic Party was also opposed.

Some measure of bipartisan support will eventually be necessary. Passing a budget through the Senate requires 60 out of 100 votes, meaning the Republicans do not have enough votes on their own.

The Democrats want health care spending restored after the Big Beautiful Bill cut Medicaid spending last fall. In addition, given that Affordable Care Act insurance subsidies are scheduled to expire in December. These proposals would cost US$1 trillion-plus and are unlikely to receive Republican support in their entirety.

For their part, the Republicans may be more tolerant of a shutdown that normal, as a key White House objective has been to shrink the federal government. This may render a government shutdown less objectionable, especially if it were to expose that certain departments are barely missed. Recall that essential services would continue during a government shutdown. Then again, President Trump’s approval rating fell substantially as a result of the government shutdown that occurred during his first term.

Arguing that any successful deal would be a last-minute affair, the Senate is recessed this week. This leaves scant days for serious negotiations. There remains the possibility of an extension that would then delay the shutdown – or a deal – until later in the fall.

It is good news that the debt ceiling is not at risk this time. It was increased by a sufficient amount that it should not be an issue before 2027 or 2028.

The 2018-2019 government shutdown in President Trump’s first term was the longest on record, lasting roughly a month. The economy cumulatively underperformed by approximately 0.2 percentage points in the most-affected quarter. This would show up as -0.8% annualized if encompassed within a single quarter.

But this masks the full effect. The economy was rebounding across a fair portion of that quarter. The furlough of several hundred thousand non-essential federal workers added about 0.2ppt to the unemployment rate, though these did not show up in the payrolls data as those workers were still considered employed.

The timing of a potential shutdown in the fall of 2025 is unfortunate. The U.S. economy is already decelerating due to tariff damage, and policy uncertainty would rise once again, discouraging risk-taking.

Still, any government shutdown economic damage is temporary, and subsequent quarters could expect to normalize economic activity.

-EL

Tariff news is now arriving at a relatively sedate clip. The main framework appears to be in place, leaving only a handful of issues. These include:

• the potential addition of further sectoral tariffs

• the outlook for the USMCA (United States-Mexico-Canada Agreement) trade deal

• the possibility of additional deals being struck with countries that failed to secure accords by August 1.

As such, let us spend a moment on 1) how tariffs are interacting with inflation, and 2) why price increases shouldn’t be as large as many people might imagine.

Tariffs in the inflation data

With the August inflation data now in hand, tariff price increases continue to appear in various corners of the U.S. Consumer Price Index (CPI) basket. We focus on 10 types of goods with particularly notable import shares. Six of these showed outsized price increases in the latest month. Seven showed larger than normal price increases over the past three months (see next table).

To be sure, it is a frustratingly varied experience. Household furnishings prices partially retraced earlier gains in the latest month. Yet new vehicles are only beginning to show higher prices after a surprisingly languid performance in earlier months.

Tariff price increases continue to appear in the Consumer Price Index basket

As of August 2025. Sources: U.S. Bureau of Labor Statistics (BLS), Federal Reserve Bank of Boston, Macrobond, RBC GAM

Real-time inflation data also argues that certain tariff-sensitive products such as apparel, furnishings and household equipment, and recreation and electronic goods are accelerating in a way that simply wasn’t happening in 2024 (see next chart).

U.S. Daily PriceStats Inflation Index shows prices of tariff-sensitive goods are rising

As of 09/08/2025. Sources: State Street Global Markets Research, RBC GAM

Of course, overall inflation has been somewhat restrained by other forces including relatively soft oil prices and decelerating shelter inflation.

Why tariff inflation is relatively small

Simply put, why doesn’t the average U.S. tariff rate of 18.6% mean that U.S. consumer prices rise by that same large percent? There are several interconnected reasons (see next graphic).

Why is tariff inflation relatively low?

Note: As of 09/22/2025. Source: RBC GAM

1. The 18.6% tariff rate is applied to imported goods. By the time wholesalers have added their typical 25% markup and retailers have added a 45% markup, that collected tariff amounts to just a 10.3% theoretical increase in the price of imported retail goods.
   

2. In practice, the foreign manufacturer, domestic wholesaler, domestic retailer and other parties along the supply chain may absorb some fraction of the tariff. Currently, foreign manufacturers are eating a notable fraction, and some U.S. businesses such as automakers are also reportedly doing the same. We presume these other links in the supply chain absorb one-third of the tariffs, leaving two-thirds of the tariff for the consumer. That reduces the price increase on imported consumer goods to 6.8%.
   

3. Only about one-third of U.S. consumer goods are imported. The other two-thirds suffers no direct effect from the tariffs. So if we want to talk about the overall basket of consumer goods, the tariff impact shrinks by a factor of three, to just a 2.3% price increase for overall consumer goods.
   

4. Finally, only around one-third of the U.S. consumer price basket is goods. The rest is services, which are not directly impacted by tariffs. Dividing the tariff impact by a factor of three once again, the theoretical price increase on the overall U.S. consumer basket should be just 0.8%.
   

Let us be clear that this is just a thought exercise, and a means of explaining why inflation is expected to be an order of magnitude smaller than the actual tariff rate. Our most-trusted modelling actually points to an approximately 1.1% increase in U.S. consumer prices based on current tariffs, not +0.8%. Also, this little thought exercise ignores a few factors, including:

• any increase in inflation expectations that might magnify the inflationary effect

• the indirect effect of tariffs on the inputs to products produced within the U.S.

• the impact of tariffs on the U.S. dollar

• any reduction in inflation that might come from tariff-induced economic weakness.

Even though the expected price increase is smaller than one might have initially imagined from tariffs, it is still very real and potentially damaging.

-EL

The U.S. Bureau of Labor Statistics’s (BLS) preliminary benchmark revisions to U.S. payroll data – not to be confused with the usual monthly revisions discussed in a recent #MacroMemo – suggest the U.S. economy created 911,000 fewer jobs between March 2024 and March 2025 than previously thought. The 0.6% markdown to the level of employment is about three times the average revision seen in the past decade.

The monthly pace of job growth over that period is now estimated at less than half of what was previously reported (71,000 per month vs. 147,000). Job gains in most industries were also revised lower. The most significant markdowns have been in leisure and hospitality, wholesale and retail trade, and business and professional services.

It’s worth noting that while these revisions incorporate data from a much larger quarterly survey, they are still preliminary. The final benchmark revision will be released in February 2026. Last year, the preliminary revision of -818,000 was reduced to -589,000 in the final release.

For now, the notion that the economy created 911,000 fewer jobs than previously thought is certainly discouraging. Combined with recent sizeable revisions to monthly payroll estimates, it adds to concerns surrounding the quality of U.S. economic data.

It could also fuel President Trump’s claims of data rigging. He has suggested the BLS inflated jobs data under Biden to boost Democrats’ election prospects – increasing the risk of further political meddling in the statistics agency. Recall, President Trump fired the head of the BLS following the publication of the July payrolls which included sizeable downward revisions to May and June data.

All the same, the slower rate of hiring makes sense. Population growth was unusually anemic during the period, and the unemployment rate was rising. Thus, even at the time, it was hard to fathom 147,000 jobs were truly being added each month in that context.

There are also some silver linings. A more modest pace of hiring suggests slightly faster productivity growth. And U.S. unemployment readings are not affected by the revisions. The jobless rate is still estimated to have increased by a relatively modest 0.3 ppts between March 2024 and March 2025, even with estimated payroll gains cut in half. The upshot is that the breakeven rate of payroll growth needed to keep the unemployment rate steady appears to have been quite a bit lower than previously thought.

A slower pace of job growth in the year to March 2025 also means the average monthly gains of 53,000 since then represent a less dramatic slowdown than previously reported (see chart). The jobless rate has increased by just 0.1 ppt since March, suggesting breakeven payroll growth has slowed even further amid a pullback in immigration.

In July, researchers from two U.S. think tanks estimated breakeven payroll growth of just 40-90,000 per month for the second half of 2025. We think it could be toward the lower end of that range.

Payroll revisions suggest lower breakeven rate, less slowdown

As of August 2025. Sources: BLS, RBC GAM

Expectations for job gains therefore need to be recalibrated lower. The triple digit monthly increases we’re accustomed to could now be few and far between. But as that wide range of breakeven estimates highlights, evaluating what constitutes a good or bad payroll report is challenging given the lack of timely and accurate immigration data.

This suggests we should focus more on the unemployment rate rather than job gains to gauge labour market health. Indeed, Fed Chair Powell suggested as much in a recent press conference when he declined to offer a breakeven rate for payrolls. He mentioned 0-50,000 at his latest press conference but expressed little confidence in that range.

A recent drift higher in the unemployment rate – with the ranks of the unemployed now exceeding job openings – points to a softening labour market. However, it is one that remains relatively healthy from an historical perspective.

-JN

Following the BLS’s benchmark revisions, the professional and business services sector stands out as the biggest drag on overall employment growth over the past 18 months. Some of the industry’s underperformance comes from the inclusion of temporary help services which is particularly cyclical and tends to be a leading indicator of a softening job market. Employers cut back on temporary workers before laying off permanent staff.

But the sector also includes many white-collar jobs. These include accountants, software developers and business support staff whose roles are likely to be impacted by growing adoption of generative artificial intelligence (AI).

So far, evidence of the impact of AI on the U.S. labour market has been mixed. But a recent and timely study by Stanford University using ADP payroll data through July 2025 found early-career workers (ages 22-25) in the most AI-exposed occupations saw a 13% relative decline in employment. The pullback has been concentrated in roles where AI is more likely to automate rather than augment human labour, like computer programmers and customer service representatives. These effects emerged in late-2022, around the time ChatGPT was introduced.

Interestingly, employment of older workers in AI-exposed roles continued to increase. The researchers posit that generative AI more easily replicates the “book learning” that recent graduates bring to the workplace, rather than the on-the-job experience of older workers.

This jives with increasingly challenging labour market conditions for those entering the workforce. It’s not unusual to see the jobless rate for younger workers rise by more than for core-age workers when the economy slows. Hiring freezes and last in-first out layoffs fall disproportionately on new entrants. Looking at recessions in the past 50 years, the unemployment rate for the age 20-24 cohort has increased by 1.3-2.0x as much as for the core-age (25-54) group. But during the current economic cycle, the jobless rate for younger workers has increased by 5x as much.

Early career unemployment tends to be more cyclical than core age

As of August 2025. Sources: BLS, National Bureau of Economic Research (NBER), RBC GAM

We don’t think AI fully accounts for today’s particularly challenging youth labour market. The combination of significant uncertainty but relative economic resilience has caused hiring to slow but kept a lid on layoffs. The difficulty finding workers during the post-pandemic boom may also have persuaded companies of the importance of hanging onto the accumulated human capital of their existing workers to a greater-than-normal extent. These factors have pushed the combined hiring and firing rate to a multi-decade low. Less labour market churn has resulted in reasonable stability for existing employees but slim pickings for new entrants.

But even if policy uncertainty abates and we see a cyclical pickup in hiring, it seems likely that some modest drag from generative AI will continue and potentially accelerate. Goldman Sachs recently estimated unemployment will increase by half a percent during the AI transition period. Again, they pointed to occupations in the professional and business services sector – computer programmers, accountants, legal and administrative assistants, and customer service representatives – as being most at risk of displacement by AI.

-JN

Without immigration, U.S. population growth would be just +0.1% to +0.2% per year. Fertility rates are down and the population is aging.

As recently as a year ago, overall U.S. population growth was nevertheless rising at around a 0.9% annualized rate. This was driven by substantial immigration, including a sizeable flow of illegal immigration.

That pace appears to have since slowed substantially. The White House has imposed stricter controls on both legal and illegal immigration, and is also attempting to increase the number of deportations of illegal immigrants. The inflow of undocumented individuals in particular has been sharply curtailed, though it was already significantly trending down in 2024 (see next chart).

U.S. undocumented border crossings have dropped significantly

As of August 2025. Land border encounters per month. Sources: U.S. Department of Homeland Security, Macrobond, RBC GAM

The upshot of this is that U.S. population growth has almost certainly slowed. Official estimates are fairly tame, suggesting that the rate of population growth has halved (see next chart). We suspect it has been more substantial than that, with population growth that may now be as low as 0.0-0.3% per year. That’s sharply below the aforementioned +0.9% rate, and also below the +0.66% average of the past decade.

U.S. population growth is projected to fall below pre-pandemic levels

Census Bureau projection starting August 2024. Shaded areas represent Trump’s first and second term. Sources: U.S. Census Bureau, Macrobond, RBC GAM

This matters for the economy, as economic growth is the result of more workers plus more productivity. The rate of increase in prospective workers is seemingly slowing quite substantially. The effects are particularly pronounced in such sectors as construction, agriculture and food services.

That long preamble brings us to the subject at hand. There are approximately 16 million undocumented residents in the U.S. today. Of these, a Pew study from 2021 estimates that approximately 66% are in the workforce. That’s 10.6 million workers.

With an uptick in immigration enforcement raids this year, the economy is set to be affected not just by slower immigration and perhaps greater deportations, but also a significant number of undocumented workers who may be hesitant to work lest they be apprehended.

There isn’t any solid data on this subject. It is mostly anecdotal, and seemingly most profound in cities such as Los Angeles. Providing a glimpse into the subject, a Kaiser survey from May 8 found that 13% of immigrants were limiting their participation in at least one day-to-day activity (such as going to work).

At an extreme, one could extrapolate from this to claim that up to 1.4 million undocumented workers could be absent from the workforce. But that’s a stretch for several reasons.

The survey merely asks if anyone in the household is behaving differently, so even if one family member out of four has altered their behaviour, that shows up as a yes.

Further, altered behaviour is defined to include not seeking medical care or not going to community events. So not everyone who answers yes to this question is avoiding work.

Additionally, it is probably not practical for most undocumented workers to forgo their paycheque for long. Most have limited savings and minimal access to the social safety net. It might be practical to avoid work for a period of weeks if the risk of being apprehended is especially high, but not indefinitely.

Taking all of this into account, we therefore imagine that perhaps a quarter of a million undocumented workers are absent from the workforce. Because such workers are theoretically included in the household survey data, that could mean an unemployment rate this is 0.1% to 0.2% higher than otherwise.

Caveats include the fact that some of these individuals may pivot from formal employment into the underground economy and/or informal work – cash jobs that are off the books. This means that any decline in employment may be overstated.

-EL

Long-term yields have risen substantially across a range of developed countries in recent years (see next chart). This is despite the fact that policy rates have generally fallen. Somehow yield curves are steepening and something is keeping those long-term rates unusually elevated.

Long-term government bond yields have climbed markedly

As of 09/19/2025. Sources: Macrobond, RBC GAM

Since the beginning of 2025, the UK 30-year bond yield has increased by 50 basis points, with a 69bps increase in France, a 74bps increase in Germany and a 79bps increase in Japan. The U.S. 30-year yield is up 70bps over the past two years (though, interestingly, unchanged since the start of 2025 – more on that in a moment).

What’s causing this increase? The higher 30-year yields have only a little bit to do with the assumption that a neutral policy rate may be higher than in the past. They have almost nothing to do with the expectation that inflation might be hotter over the long run (Japan is an exception). But they have quite a lot to do with a bigger term premium – essentially, the view that long-term government borrowing has become less attractive to investors.

Why less attractive? Central to the answer is surely that government fiscal positions are increasingly challenging – big debt loads, large deficits and a difficult path forward to afford it all.

We and others have generally flagged the U.S. for particular attention, in line with diminishing U.S. exceptionalism. The notion is that in addition to its fiscal challenges, the U.S. is delivering suboptimal economic policy, it is experiencing a worrying degree of domestic polarization, and simultaneously a sizeable loss in foreign trust.

But for all of that, the U.S. is actually the only country of the six examined that has not experienced a substantial rise in its 30-year yield in 2025 (see next chart). This is all the more remarkable when one thinks of the fact that four of the other five countries did more rate cutting than the U.S. at the short end of the curve.

Long-term government bond yields have gone up globally

As of 09/19/2025. Sources: U.S. Department of Treasure, Macrobond Financial AB, RBC GAM

Is the U.S. therefore still just as exceptional as ever? In some ways, such as in its technological lead, yes. And we still expect it to be the fastest growing of major developed nations, if by less than in recent years.

But we stubbornly stick to the notion that a portion of this American exceptionalism is indeed being lost, and may eventually be reflected at the long end of the bond market. Perhaps it will just be that as the Fed cuts rates over the next year, long-term yields remain stubbornly unaltered. Note that the U.S. 30-year yield did go up substantially in 2024 (though so did the others). One might also conjecture that the plan to tilt American debt issuance toward shorter dated issuance could be artificially flattering long-term U.S. yields.

-EL

President Trump recently called on the U.S. Securities and Exchange Commission (SEC) to end quarterly reporting requirements for public companies, claiming a shift to semi-annual reporting “will save money, and allow managers to focus on properly running their companies.”

The idea that quarterly reporting promotes short-term thinking and places an undue regulatory burden on public companies – adding to costs and encouraging some to remain private – isn’t new. In fact, Trump raised this issue during his first term, but the SEC’s investigation at the time yielded no changes.

A simple majority vote of SEC commissioners – Republican appointees hold a 3-1 majority with one vacancy – would be sufficient to approve the change. Congressional support isn’t necessary. But the standard process to implement such rule changes, including soliciting public comments, can take several months. It’s unclear how hard Trump will push for the change this time around.

For context, the SEC requires public companies to file Form 10-Q for each of the three fiscal quarters between annual reports. It requires unaudited financial statements, management comments on financial results, and information on any important changes in legal and market risks.

The SEC doesn’t require public companies to publish earnings releases and conduct earnings calls, which also take up company resources and management’s time. Nor does the SEC force companies to issue forward-looking earnings guidance, which is what financiers like Warren Buffett and Jamie Dimon blame for management’s excessive emphasis on short-term results. Below is a summary of the benefits and drawbacks of less frequent disclosures.

Potential benefits of less frequent disclosures:

• Reduced regulatory costs: Less frequent reporting will trim public companies’ legal and accounting bills, although experts suggest three 10-Q filings per year (between annual reports) only account for a combined 15-20% of overall audit costs. While some of the other costs associated with “earnings season” are discretionary (i.e., not imposed by the SEC) they might still be reduced alongside less frequent regulatory disclosures.

• More investment: Proponents suggest less frequent reporting will allow management to focus on longer-term objectives and results. This could lead to fewer share buybacks and more investment. However, a UK study found no significant change in the investment decisions of public companies when regulators moved from semi-annual to quarterly reporting in 2007. Similarly, when the UK reverted to semi-annual reporting in 2014, those that stopped reporting quarterly didn’t invest significantly more than those that continued more frequent reporting.

• More public companies: Regulatory costs for public companies are rising – and have been blamed for a decline in the number of public companies in the U.S. This number has halved since 1997. Quarterly reporting has been mandated since 1970, but reforms have made those filings more onerous in recent decades. More firms going public would expand the investible universe for the average investor, offering exposure to companies that might otherwise remain private and more accessible to institutional and high net worth investors. However, other factors have contributed to the falling number of public companies as well. These include growth in private capital, increasing market concentration and merger and acquisition (M&A) activity, and a desire to protect proprietary information or intellectual property by remaining private.

Potential limitations and drawbacks of less frequent disclosures:

• Discretionary reporting/inertia: Just because regulators require fewer disclosures doesn’t mean companies will stop reporting on a quarterly basis. Two years after the UK scrapped mandatory quarterly reporting, only 30 Financial Times Stock Exchange (FTSE) 100 companies stopped publishing quarterly reports. The share was greater (more than half) for smaller FTSE 250 companies, since audit costs per unit of revenue tend to be higher for smaller firms. In the European Union (EU), which reverted to semi-annual reporting in 2013, about half of companies still report quarterly. In some cases, the persistence of quarterly reporting reflects stock exchange listing requirements.

• Less timely public information: Less frequent reporting naturally means more non-public information, which raises the risk of insider trading. It also gives larger institutional investors with research teams and greater access to company management an edge over smaller retail investors. Less frequent disclosures mean investors have more information to digest when companies do report. This could increase market volatility around reporting time.

Higher financing costs: Higher frequency reporting aids price discovery. The aforementioned UK study found quarterly reporting improved the accuracy of analysts’ earnings forecasts. This helps lower the cost of capital for public companies.

Overall, there are pros and cons to reducing the frequency of financial reports. A lighter regulatory touch could help reduce costs for smaller firms that might be able to get away with less frequent reporting. But larger companies could face pressure from investors to continue with quarterly reporting and earnings guidance, even if regulators don’t mandate it. We are doubtful that semi-annual reporting requirements would significantly increase long-term thinking and boost business investment, or cause a sudden reversal of the trend toward fewer public companies and growing market concentration in the U.S.

-JN

We have generally argued that Canada’s new government is implementing pro-growth public policies. The budget deficit appears set to grow, although more will be revealed in the November 4 budget. This constitutes a positive fiscal impulse. The government has already delivered modest tax cuts and aspires to boost housing construction. Less government spending and more government investment are expected – theoretically, a pivot that delivers a larger fiscal multiplier.

But the key economic plank is arguably the goal of increasing Canadian infrastructure and resource investment by streamlining regulations and accelerating implementation. An important step forward was taken in recent weeks when a list of the first five major infrastructure projects to be fast tracked were announced. These are:

• Doubling liquid natural gas production at Kitimat in British Columbia.

• Enhancing the Red Chris Mine in British Columbia, with the goal of extending its life by more than a decade and boosting copper production by more than 15%. The mine also produces gold.

• Supporting the creation of a new copper mine at McIlvenna Bay in Saskatchewan.

• Building small modular nuclear reactors at Darlington in Ontario.

• Expanding the container terminal capacity at the Port of Montreal in Quebec by 60%.

These all appear worthwhile, helping to boost Canada’s resource production, secure new markets at a time when the U.S. has turned inward, and innovate and augment the electrical grid.

It is hard to quantify the extent to which the government will be able to claim responsibility for advancing such projects. For the most part, it is not funding them so much as reducing the barriers to implementation. Most have private funding or are funded by a lower level of government.

A central criticism is that many of these particular projects are already quite far advanced in the approval process, such that reducing the red tape from here may not make a large difference.

Thus, the real test of whether the streamlined regulations make a difference may occur with future projects. Proposals now include:

• a wind project in Atlantic Canada

• a carbon capture and storage project in Alberta

• upgrading the Churchill port in Manitoba

• constructing high speed rail between Toronto and Quebec City

• doing more critical mineral development

• developing an economic and security corridor in the Arctic.

Further, there are hundreds of smaller resource and infrastructure ideas that will demonstrate over the coming years whether the investment climate in Canada has truly changed for the better.

These have the potential to support gross domestic product (GDP) growth, increasing capital expenditures, creating well-paying jobs and raising productivity. In a best-case scenario, Canada’s annual economic growth could increase by several tenths of a percentage point for a decade or longer.

-EL