Canada’s economic performance under the Liberal government has shown concerning trends in both GDP growth and productivity since 2015. The data reveals a period of stagnant growth and declining productivity metrics that stands in stark contrast to peer nations, particularly the neighboring United States. This report examines the key economic indicators during this period and explores the factors that may have contributed to these outcomes.
GDP Performance Under Liberal Leadership:
Stagnant GDP Per Capita Growth
One of the most striking economic trends during the Liberal government’s tenure has been the remarkably weak performance in GDP per capita, a critical measure of a nation’s standard of living. Since the Liberals took office in 2015, Canada has experienced cumulative real GDP per capita growth of only about 1.7% through the third quarter of 2024. This represents one of the poorest performances among OECD nations, with Canada recording the second-lowest GDP per capita growth in the entire OECD during this period.
The situation becomes even more concerning when examining recent trends. Statistics Canada data showed that real GDP per capita decreased by 1.3% in 2023 and then by a startling 14% in 2024. This is part of a broader pattern where GDP per capita has declined in five of the last six quarters, leaving it essentially no higher than it was in the fourth quarter of 2014.This represents what some economists have dubbed a “lost decade” of economic growth.
Comparison with the United States under mostly Democratic Rule
The divergence between Canadian and American economic performance during this period has been particularly stark. While Canada’s GDP per capita grew by just 1.7-1.9% under Liberal leadership, the United States experienced growth of approximately 18.2-18.6% during the same timeframe. Economists estimated that if Canada had merely kept pace with the U.S. over the period, the Canadian economy would be 8.5% larger, translating to approximately $6,200 more in income per Canadian annually.
In dollar terms, this divergence is even more pronounced. In December 2014, before the Liberals took office, Canada’s GDP per capita was $51,025 compared to America’s $55,264. By December 2024, Canada’s GDP per capita had only increased slightly to $55,895, while America’s had surged to $87,081. This represents a dramatic shift in relative economic strength, with Canada’s GDP per capita falling from about 98% of the U.S. level to just 66% over a decade.
Recent Growth Patterns
Despite some modest improvements in overall GDP growth in recent quarters (with GDP rising 2.6% on an annual basis in the first quarter of 2024), these gains have been largely driven by population growth through immigration rather than productivity improvements. When adjusted for population growth, the economic performance remains concerning, with even Liberal leadership acknowledging challenges in this area.
Productivity Performance: Declining Productivity Trends
Productivity growth, a key driver of long-term prosperity, has shown alarming trends during the Liberal government’s tenure. The data indicates that Canadian productivity has been increasing at a slower rate than in other industrialized countries. In fact, recent years have seen not just slowing but actual declining productivity, with some measures showing negative productivity growth.
Since 2019, there has been a pronounced downshift in labour productivity across most Canadian industries. The goods-producing sector has been particularly affected, experiencing a 1.2% average annual decline in productivity since 2019. This represents a significant reversal from the previous decade’s performance. Construction has been the worst-performing industry, with labour productivity reaching a near 30-year low.
Comparison with International Peers
The productivity gap between Canada and the United States has widened substantially. While U.S. productivity growth has been running at approximately 2.6% year over year, Canadian productivity has declined by about 0.6% over the same period. This divergence is particularly concerning given that the U.S. is Canada’s largest trading partner and main competitor for investment, entrepreneurs, and skilled workers.
The severity of the productivity situation was underscored when the Deputy Governor of the Bank of Canada, Carolyn Rogers, publicly described low productivity in Canada as an “emergency” requiring immediate action. This unusually direct language from a central bank official highlights the gravity of the situation.
Contributing Factors: Insufficient Business Investment
One of the key factors behind Canada’s productivity challenges appears to be inadequate business investment. Business capital investment in Canada stands at approximately 8% of GDP, less than half the rate in the United States. The rate of non-residential investment as a share of GDP dropped significantly around 2014, coinciding with a global commodities recession and oil price collapse, and has not fully recovered since then.
This investment gap has resulted in Canadian businesses and workers having less access to modern economic tools and technological advancements necessary for productivity improvements. The consequences of this underinvestment have become increasingly apparent in comparative economic statistics.
Government Policy Orientation
Several analyses suggest that Liberal government policies may have contributed to these economic challenges. Critics argue that the government has focused more on income redistribution than on fostering economic growth. Additionally, government spending patterns, particularly those extended beyond the pandemic period, may have “crowded out” private sector investment needed to improve productivity rates.
The Liberal government’s immigration policies have also been cited as potentially contributing to the GDP per capita decline. While increased immigration has boosted overall GDP figures, some economists argue that the rapid pace of population growth without sustainable economic infrastructure growth has placed pressure on housing, healthcare, and other services, potentially diluting per capita economic output.
Regulatory Environment
The regulatory environment has also been identified as a potential factor. The Deputy Governor of the Bank of Canada noted that “government incentives and regulatory approaches can change from year to year … companies are naturally wary of regulatory approval processes that can be both lengthy and unpredictable.” This regulatory uncertainty may have dampened business confidence and investment decisions over the decade.
Implications and Economic Context
The combination of stagnant GDP per capita growth and declining productivity poses serious long-term challenges for Canada’s economy. Without improved productivity growth, workers will likely face continued wage stagnation, and government revenues may not keep pace with spending commitments. This could necessitate either higher taxes or reduced public services.
The economic performance under Liberal leadership has prompted significant political discourse, with the opposition referring to a “lost decade” of economic growth. The Liberal Party, now under the leadership of Mark Carney, has acknowledged these challenges to some degree, with their recent platform emphasizing the need to increase productivity and proposing to separate capital and operating spending to better focus on investments that build economic capacity.
Conclusion
The economic data paints a concerning picture of Canada’s GDP and productivity performance under Liberal leadership since 2015. The period has been characterized by stagnant or declining GDP per capita, widening gaps with the United States and other OECD peers, and deteriorating productivity metrics across multiple sectors of the economy.
As Canada approaches its 2025 federal election, the economic legacy of the past decade has become a central issue in political debates. While there are varying interpretations of the causes behind these trends—ranging from government policy choices to external global factors—the empirical evidence clearly shows that Canada’s economic performance on these key metrics has been subpar during the Liberal government’s tenure. The incoming government, a leader with responsibilities for post financial advising, will face significant challenges in reversing these concerning economic trends that were put into place.
