News & Updates

    The Morning Brief - 04.24.19

    Posted by Bruce Carson on Apr 24, 2019 8:36:25 AM


    Prince Edward Islanders Vote

    The electors of Prince Edward Island determined that there not only would be a change of government for the Island, it would be a minority government with the PC Party having the largest number of seats and the Green Party becoming the official opposition. The results with one seat not reporting, a byelection to be held in May, are PCs 12, Greens 9 and the Liberals relegated to third party status with 6 seats. The NDP did not elect any of its candidates. Premier Wade MacLauchlan, the Liberal leader did not hold his riding.

    While the voter turnout was lower than it has been in the recent past, the PC Party received 37.3%, Greens 31% and 28.5% for the Liberals. The referendum dealing with proportional representation was defeated.

    There will be those who will make the argument that the results in PEI can be extrapolated across the country, having a potential effect on the fall general election and there will be those who will make the point that PEI is such a small sample size of Canada, and what happens on the Island, stays on the Island.

    Like most matters like this, the truth lies somewhere between these two extremes. First, surely even Prime Minister Trudeau must be getting tired of phoning right leaning premiers-designate to congratulate them on yet another win. If he is given to moments of introspection or reflection, perhaps he wonders if his government, the issues he has picked to champion or its track record or lack thereof, has played a part in these victories.

    Second, this result, a PC minority government was unexpected and should provide some hope for PC leader Ches Crosbie’s campaign in Newfoundland and Labrador in that provincial election, the last one before the fall general election.

    Third, the election campaign in PEI was conducted with respect among the party leaders and civility among them and towards supporters of all parties. This was exemplified in the leaders’ debate when the leaders were actually encouraged by the moderator to engage in more vigorous debate.

    What struck last evening was the air of civility, compassion and cooperation expressed by all leaders and their commitment to work on behalf of all Islanders to bring the kind of government that would put them first.

    Premier-designate Dennis King spoke of a collegial realignment and the message of the need for cooperation sent by voters. He said that islanders want their political parties to work together, to put partisanship behind them. Green leader Peter Bevan-Baker said “I am a strong believer in the capacity of minority governments to create a collaborative environment.” He also spoke emotionally of the loss of Green candidate Josh Underhay and his young son on Good Friday. It should be noted that the Green Party platform was not a single issue one, but broadly based dealing with economic issues as well as social, healthcare and education issues. Defeated Premier Wade MacLauchlan noted that the defeat of the Liberals was a result of the tide going out. And the NDP in a ‘change election’ failed to elect a candidate.

    One could argue that the most important take-away from this election was civility among the political leaders and their commitment to serve those who elected them. This is in sharp contrast to the rhetoric we have heard from federal party leaders who are talking about the nastiest political campaign ever. Conventional wisdom is that negative campaigns work, that is why political parties engage in them. Perhaps the campaign in PEI is the campaign that demonstrates that it doesn’t have to be that way, and leaders who leave civility behind will be punished by the electorate.

    Economy—Bank of Canada, Interest Rates and Monetary Policy Report

    Later this morning Bank of Canada Governor Stephen Poloz and Senior Deputy Governor Carolyn Wilkins will deal with interest rates and release the Bank’s quarterly Monetary Policy Report. Don Pittis on the CBC business website wrote of the Bank of Canada being caught between Trump and Trudeau and only something severe would force the Bank to move on rates.  It would take a “severe jolt to the economy to break the Bank out of its current immobility” wrote Pittis.

    He believes the Bank will “seek to balance risks between economic good health and threat of economic decline.”

    On inflation, Pittis wrote about the “glimmer” of increased inflation and warned that we have moved into an era of “no more cheap gas.” This price is also increased by the carbon tax, and even though it is to be rebated, it still has to be paid at the pump. This means higher prices for fuel and for goods transported by truck. An increase in inflation is almost inevitable.

    Pittis advances the view that if the economy went into a sudden tailspin due to some outside shock, Poloz would be justified in lowering rates. However, as an election nears, this would send “a strong negative signal” which could be seen as the economy slipping. His conclusion is that there will be no change in rates over the next six months.

    Kevin Carmichael writing in the Financial Post advanced the proposition that the Bank of Canada will advance a new neutral interest rate. He states that in October when the Bank was last hiking rates Poloz talked about raising rates to a neutral stance in order to achieve the inflation target. That neutral rate was to be between 2.5% to 3.5%.

    Carmichael argues that no one expects Poloz to raise rates but still there may be a “shift to a different sort of neutral.” The Royal Bank has advised clients to erase talk of higher rates.

    Carmichael believes there will be a new neutral rate which would be between 2% and 3%. If this is the case then the Bank could erase seeking a neutral rate from its policy statement “because we are there now.”

    Whether the Bank addresses a shift to a new definition of a neutral rate or not, there seems to be general agreement that Canada is experiencing a period of slow or soft growth which will continue for the next six months. This is not what a political party seeking reelection would want to hear.

    If this is the signal contained in the Bank’s Monetary Policy Report, then get ready for spending announcements from the federal government seeking to add stimulus to the economy. The problem is, particularly with this government, which has great difficulty transforming announcements into action, it is probably too late to make any significant difference between now and the end of October to the lives of Canadians.

    To Come

    --today, Bank of Canada deals with interest rates and releases its Monetary Policy Report

    --today, the Senate Energy Committee continues its hearings on Bill C-69 in Halifax

    --April 27-28, Japan’s Prime Minister Abe in Ottawa

    --April 29, Parliament resumes sitting through four weeks until May 17

    --April 30, GDP numbers for February to be released

    --April 30-May 1, U.S. Federal Reserve meets--bc

    Topics: Morning Brief

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