This policy brief highlights what the fall economic update means for Canada’s digital economy. The fall economic update is tabled by the Minister of Finance in the fall of each year. It updates Canada’s economic outlook, announces new policies and programs, and sets the stage for the annual Budget in the spring.
The federal government tabled its fall economic statement on November 21, 2023. Addressing Canada’s housing crisis was the core focus of the 2023 fall economic statement, with 10 of the announced programs and policy measures focusing on housing alone. In addition to housing, several measures seek to make life more affordable for Canadians, increase competition in industries like commercial air travel and banking, and reduce government spending. While the digital economy was not a core focus of the economic statement, a number of the government’s announcements will impact Canada’s digital economy. A summary of these measures and the government’s economic update is provided below.
Economic Update
Canada’s macroeconomic position remains strong relative to its peers. Canada leads inflation-adjusted GDP growth across G7 economies from Q1 2022 to Q3 2023 and is projected to lead the G7 in GDP growth over the remainder of the fiscal year. In the first half of 2023, Canada brought in 29 billion USD in foreign direct investment, ranking third across OECD countries. Canada’s labour market also remains strong. Despite a slight downturn in Canada’s labour market in recent months, the share of Canadians aged 15 to 64 who are employed remains above pre-pandemic levels. Further, women’s total labour market participation is above pre-pandemic levels. Canada saw the strongest employment growth of the G7 countries, both during the pandemic and the more recent post-pandemic period. However, the unemployment rate is expected to rise to 6.5% in the second quarter of the next fiscal year.
In terms of the federal government’s fiscal position, the 2023-2024 fiscal year deficit is expected to remain similar to the 2022-2023 fiscal year. Canada is expected to see incremental improvements in the budgetary balance and deficit in the subsequent years. Government departments and agencies are expected to reduce and refocus their spending over the next few years, as well as reduce unallocated investment.
Program and Policy Announcements Relevant to the Digital Economy
Open Banking
One of the more significant announcements for Canada’s digital economy relates to open banking. In the fall economic update, the government announced its intention to introduce open banking legislation as part of Budget 2024. The legislation would establish a consumer-driven banking framework to regulate access to financial data and would be aligned with that of key trading partners like the United States. To help businesses prepare for the new legislation, the government also released a new Policy Statement on Consumer-Driven Banking. The policy statement and forthcoming legislation are a welcome announcement for Canada’s financial technology sector, which has advocated for open banking legislation for the past several years.
Competition and the Right to Repair
The fall economic update announced several proposed amendments to the Competition Act. Included in these amendments are measures that would enable the Competition Bureau to better detect and address “killer acquisitions” and other anti-competitive mergers. Killer acquisitions can negatively impact Canada’s innovation ecosystem by preventing potentially successful startups from scaling. Anti-competitive mergers can also negatively impact Canada’s innovation ecosystem by reducing competition in areas like the provision of telecommunications services.
Other proposed amendments would introduce a “right to repair” by preventing manufacturers from refusing to provide the means of repair of devices and products in an anti-competitive manner. In addition to contributing to Canada’s production of e-waste, the lack of a right to repair in Canada has been identified as a barrier to technology adoption in sectors like agri-food.
Interprovincial Labour Mobility
The federal government announced that it will work with the provinces in the coming months to remove barriers to internal labour mobility, particularly for health and construction workers. Barriers to internal labour mobility prevent workers in provincially regulated sectors from working in other regions. While not directly related to Canada’s digital economy, ICTC’s research shows that labour shortages in healthcare and construction roles negatively impact the ability of other sectors to adopt technology, including health tech, agri-food tech, clean tech, and clean energy solutions.
Green Economy
The fall economic statement announced that the Department of Finance; Innovation, Science, and Economic Development Canada; and Environmental and Climate Change Canada will investigate options for making climate disclosures mandatory for private companies. Making climate disclosures mandatory for private companies would be a big win for Canada’s green economy: climate disclosure makes the environmental impact of private companies more transparent and, in turn, enables buyers, investors, and other financial actors to consider environmental impacts in procurement and investment decisions.
In an effort to increase the adoption of biomass energy solutions, the fall economic statement proposes to expand eligibility for the 30% Clean Technology investment tax credit to include systems that produce electricity, heat, or both electricity and heat from waste biomass.
Launched in 2023, the Canada Growth Fund is a “$15 billion arm’s length public investment vehicle led by some of Canada’s leading investment professionals from the Public Sector Pension Board.” The fund is investing in businesses and technologies to help grow the clean economy and provide new jobs for Canadians. The fund made its first investment in October of 2023, investing $90 million in capital investment to a geothermal company based in Calgary. Moving forward, “the Canada Growth Fund will be the principal federal entity issuing carbon contracts.” In other words, the fund will work to develop carbon markets in Canada, including increasing the predictability of carbon pricing and de-risking climate change mitigation projects across the country. The 2023 fall economic statement states that further investments in the fund will be announced in the coming weeks.
This brief is part of ICTC’s policy updates series. ICTC provides timely updates on policy and political developments in Canada, including federal, provincial, and territorial election campaigns, fall economic updates, annual budgets, and other major updates to policy and programs. Written by Allison Clark, Erik Henningsmoen, Mairead Matthews, Justin Ratcliffe, and Todd Legere, with generous support from the ICTC Research and Policy Team
