Opinion: Economic growth? Chrystia Freeland is deceiving us

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Finance Minister Chrystia Freeland recently said Canada will have “the strongest economic growth in the G7.” But is it true? And are Canadians better off for it?

The Trudeau government regularly uses comparisons between G7 countries (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States) to assess Canada’s economic performance. And when comparing economic growth as a whole (that is, global growth, as measured by GDP), Freeland is right that Canada’s economy is doing well compared to the rest of the G7.

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Specifically, from 2000 to 2023, Canada’s average GDP growth (adjusted for inflation) was the second highest in the G7 at 1.8% per year (behind only the US). And in a recent report, the International Monetary Fund projected that Canada’s overall GDP growth will be the second highest in 2024 and lead the G7 in 2025.

But there’s a serious problem with these measures: they don’t take into account the rates of population growth in each country, and therefore don’t measure whether individuals are actually better off.

Simply put, economies grow when there are more people producing goods and services (i.e. population grows) or when people are able to produce more per hour worked (i.e. productivity increases). In recent years, the Canadian economy has grown almost exclusively due to population growth, which has grown at historic rates due to record levels of immigration, while productivity has declined to the point where it is now consider it an emergency.

In fact, from 2000 to 2023, Canada led the G7 in average annual population growth, which has served to inflate the country’s aggregate GDP growth rate.

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Therefore, to more accurately measure Canada’s economic performance relative to other countries, economists use GDP per capita, which accounts for different population growth rates. This measure is a much better indicator of individual income and living standards.

To that extent, Canada is an economic laggard. Canada’s average annual growth rate of GDP per person (adjusted for inflation) between 2000 and 2023 was 0.7%, tied for second to last in the G7, ahead of only Italy (0.1% ).

If you include a broader subset of advanced economies and focus on the Trudeau government’s tenure, the picture is even worse. From 2014 to 2022 (the latest year of data available), Canada was tied for the third-lowest average annual growth rate in inflation-adjusted GDP per person of 30 countries of the Organization for Co-operation and Economic Development (OECD). Canada’s average growth rate during this period (0.6%) was surpassed only by Luxembourg (0.5%) and Mexico (0.4%).

Looking ahead, Canada’s long-term economic outlook is equally dismal. According to the OECD, Canada is expected to see the lowest average annual growth rate of GDP per person in the OECD from 2020 to 2030 and from 2030 to 2060.

When Freeland boasts about aggregate GDP figures, while ignoring how historic levels of population growth fueled by record immigration inflate them, he is misleading Canadians.

In reality, Canadian living standards lag behind the rest of the developed world, and are expected to fall even further in the coming years.

Jake Fuss and Grady Munro are economists at the Fraser Institute.

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