Published in www.calcalist.co.il - Israel's daily business newspaper. Editorial contributions from Yossi Tanuri, Director General of JFC-UIA's Israel office.
Canada’s New Prime Minister:
A Political Prince who is not Afraid of a Deficit
In the five debates which were held during Canada’s longest election campaign since 1872, Justin Trudeau, the leader of the Liberal Party, promised to bring about a change in national priorities.
Thanks to this promise, Trudeau succeeded in ousting Prime Minister Stephen Harper -- the leader of the Conservative Party and a close friend of Israel -- after a decade in power. “We defeated the idea that Canadians should be satisfied with less,” Trudeau wrote on his Facebook page, after his victory became apparent.
Indeed, Canada’s infrastructure has been neglected for years; it no longer meets the country’s needs, mainly due to the pressures of high immigration. Accordingly, Trudeau plans to invest heavily in roads, hospitals and schools, in order to encourage investment and create new jobs. He plans to pay for these investments by increasing the deficit.
Trudeau has also pledged to create financial tools which will benefit the middle class. This is in contrast to Harper, who granted significant tax benefits on savings to the well-off.
“For the first time in ages, a single party will govern Canada, without the need for a coalition or compromise, ensuring a strong, stable government,” explains Yossi Tanuri, director-general of JFC-UIA Canada, which represents major Canadian Jewish philanthropists and business people in Israel. Tanuri, who knows both Harper and Trudeau personally, says that “while Harper was Israel’s greatest friend in recent times, I don’t expect a change in the excellent relations which exist between the two countries, and which are based on the values of democracy and a free economy.”
Having won the leadership of the Liberal Party in April 2013 with 80% support, Trudeau had trouble winning the race for prime minister. Aged only 43, his youth was held against him and he was accused of being unqualified to lead the country.
The New Democratic Party, led by Thomas Mulcair, appealed to voters from the left, while Harper's party, which rode the waves of the victory of the conservatives in Britain in May, threatened to steal voters from the right. As it happened, the long election campaign enabled Trudeau to persuade voters to return to the country's oldest party.
Trudeau -- who tweeted "we will not disappoint you” after his victory -- brings to the post a rich family heritage. His father, Pierre Trudeau, was prime minister from 1968 to 1984 and is considered the father of modern Canada. “Trudeau instilled two central values in Canada,” says Yossi Tanuri, “culture and freedom. He turned Canada into a bi-cultural country, comprising both French Canada and Anglo-Saxon Canada. He also laid the foundations of Canada’s modern free market.”
According to a survey conducted this month by Canada’s Association of Certified Public Accountants, 40% of senior executives are pessimistic about Canada's economic performance in the coming year, compared to only 20% in a similar survey conducted three months ago. Only 36% of managers expect to recruit new workers in the near future.
These figures are not surprising. The Canadian economy is technically in recession, following negative growth of 0.8% in the first quarter and 0.5% in the second. This year’s annual growth rate is expected to be 1%, compared with 2.4% in 2014. The cause of these grim figures is the falling price of commodities -- especially oil, the price of which has almost halved in the past year. This has hampered investment and exports, knocking the Canadian dollar to an 11-year low against the US dollar.
Oil and commodities make up approximately 40% of Canada's exports. Trudeau maintains that Canada’s vulnerability to commodity prices requires it to develop new engines of growth and production.
“Harper paid a high price for global changes which occurred regardless,” says Tanuri. China’s imports have declined for 11 consecutive months, with a fall of 20% last month alone. China’s woes will lead to a loss of about $5 billion a year in Canada's revenues from exports, and a contraction of about 0.3% in annual GDP.
“Canada’s oil and gas industries have been badly hit over the last year,” explains Tanuri. Hundreds of thousands of workers have been laid off and salaries have been cut. Entire sectors, both direct and indirect, have suffered as a result.”
Compounding the erosion of commodity prices was Canada’s real estate bubble. House prices rose by 57% between 2005 and 2013, while household debt as a percentage of disposable income soared to an all time high of 165%.
According to Tanuri, the surge in real estate prices was sparked by the arrival of wealthy immigrants from the Far East, as well as by low interest rates which fell to 0.5% and encouraged borrowing.
Most mortgages, it should be pointed out, are insured by the government and the rate of high-risk mortgages is only 5%. Unlike during the sub-prime crisis which broke in the United States in 2008, high risk borrowers in Canada must have equity of 50% in purchasing an apartment. “The Canadian banking system is one of the safest in the world,” says Tanuri. “I wouldn’t expect any Canadian banks to collapse.”
“When Canadians went to the polls, they went to vote for one thing – change. Trudeau, who is young, handsome and fresh, represented this change. Canada ushered in this new age by granting Trudeau a landslide victory, a victory which no survey had anticipated.”
“Israeli companies -- particularly in the fields of hi-tech and finance -- which are looking to enter Canada, have a golden opportunity,” says Tanuri. “The erosion of the Canadian dollar by 25% against the shekel in the last eighteen months also opens a window for investment in real estate and infrastructure.” According to Tanuri, a trade delegation from Ontario -- Canada’s wealthiest province -- will visit Israel in May to court investors.
- Aged 43, he is married with three children.
- First elected to Parliament in 2008, he became leader of the Liberal Party in 2013.
- He holds a BA in literature and education, and is the son of Pierre Trudeau, the father of modern Canada.
- He is a former snow-board instructor and nightclub bouncer. His wife is a television presenter.