Canada rebounded quickly from the pandemic, and in 2022 it was the fastest growing economy in the G7. This was due to government support, strong population growth (highest in the G7), and resilient household and businesses. In addition, the Canadian labour market remains exceptionally strong; there are 830,000 more workers now compared to before the pandemic, and the unemployment rate sits at a near record low of 5%.
Despite the economic strength, some concerns remain. Although inflationary pressures are easing, as supply chains ease and global demand cools, it is still high. The resulting interest rate hikes are beginning to make their way through the economy, which will lead to slower growth in the near future. Private sector economists forecast that the economy will enter a mild recession, with annual real GDP growth of 0.3%.
Improving Fiscal Position
As a product of the slower growth, the federal debt-GDP ratio is expected to increase slightly in 2023-24. However, it is projected to decline from 2024-25 onward, reaching 1% of GDP in 2025-26. All-in-all, Canada is expected to have the largest fiscal balance improvement from G7 countries since the start of the pandemic. This strong fiscal foundation will allow the government to provide inflation relief to the most vulnerable Canadians and deliver investments that will help create jobs and fuel economic activity. Detailed below are some measures from the 2023 Federal Budget.
Clean Technology Investment Tax Credits
On its path the net-zero, the Budget proposes a new 15% Investment Tax Credit for Clean Electricity. Examples of eligible investments include wind, solar, tidal, and nuclear power generation.
The Federal Government also expanded on the 2022 Fall Economic Statement by announcing additional details on the labour requirements for the Clean Technology and Clean Hydrogen Investment Tax Credits. To be eligible for the highest tax credit rates, businesses must pay a total compensation package that equates to the prevailing wage. The definition of prevailing wage would be based on union compensation, including benefits and pension contributions from the most recent, widely applicable multi-employer collective bargaining agreement, or corresponding project labour agreement. The tax credit also requires that 10% of the tradesperson hours worked must be performed by registered Red Seal trade apprentices.
Tradespeople’s Tool Deduction
To help tradespeople invest in the equipment they need, the budget proposes to double the maximum employment deduction for tradespeople’s tool expenses from $500 to $1,000.
For a complete copy of the 2023 Federal Budget, click here
This article is written and republished from the Ontario Construction Secretariat