The main objectives of any government include attaining a high level of growth rate, keeping the level of unemployment low, maintaining a robust balance of payments, and controlling the inflation. In 2015, the Canadians changed the country’s leadership by electing a new liberal government. One of the reasons that made them do this was poor economic performance. In particular, the Canada’s economy fell into a recession due to the crash in the international oil prices in 2014. The new government has promised to resuscitate Canada’s economic growth by heavy spending in the infrastructure. The Canadians have high hopes in this government considering the fact that the majority of them elected it. They are confident that it will succeed in reviving their country’s poor economic performance.
The year 2015 was one of the hardest years for Canada. It started with a crash in the global oil prices and then economic contractions during the second and third quarters. Specifically, the country experienced contracting GDP and high levels of unemployment during these quarters. Nonetheless, there was an improvement in the real GDP during the fourth quarter thanks to increased expenditure by the new government. Adomait and Maranta (7) assert that Keynes believed that it is the responsibility of the government to intervene in the economy using proper expenditure programs. In essence, this is what the Canadian government has been doing since assuming power. In particular, it is spending on the social infrastructure, green projects, and public transit as it promised during the campaigns. The new leaders believe that this expenditure will be the solution to the economic woes, which Canada is going through at the moment. Although Canada’s economic outlook at the moment remains weak, the recession is easing.
The main objective of the Canadian government in spending on the infrastructure is to facilitate a reduction in the high rates of unemployment and facilitate the attainment of a high level of economic growth. In my opinion, this government has taken a right course. Ideally, the heavy spending on the infrastructure especially the public infrastructure will help the Canadian government bolster economic growth and help Canada recover from the recession. According to the Centre for Spatial Economics (4), a public infrastructure expenditure program generates 9.4 jobs per million dollars spent and increases the GDP $1.43 for every dollar spent in the short-term. Consequently, the infrastructure expenditure by the new Canadian government will create new jobs and in one way or another help reduce the unemployment problem in both the short-term and long-term. Additional employment implies a faster recovery (Adomait and Maranta 68). Thus, the increase in the rate of employment will facilitate GDP growth and eventually help Canada recover.
Apart from reducing the rate of unemployment, I also believe that the infrastructure spending by the Canadian government will raise the investment in the private sector. The Centre for Spatial Economics (4) further maintains that a public infrastructure expenditure program increases the investment in the private sector in the long-run by up to $1.00 for every dollar spent and in the short-run by as much as $0.34 for every dollar spent. Ideally, this implies that the infrastructure spending by the Canadian government will bolster the country’s private-sector investment also during both the short-run and long-run. The private sector is essentially a growth engine. In other words, this sector is vital to the economic growth. The improvement in the Canadian private-sector investment will also play a significant role in reducing the rates of unemployment by generating new opportunities. As a matter of fact, the rise in the investment in the private sector as a result of the infrastructure spending by the Canadian government will drive the country’s productivity that will, in turn, drive the economic growth.
Without a doubt, the infrastructure spending by the Canadian government will stimulate the macro economy. This government came into power at a time when Canada was experiencing a negative and low growth. Its adoption of the infrastructure spending program is a good move considering the condition of the Canada’s economy. I strongly believe that the new government will successfully solve the country’s economic problems using this program. Ideally, the program will raise the country’s aggregate demand and eventually facilitate the improvement in the economic growth. In particular, the infrastructure spending by the new Canadian government will create a multiplier effect. It will increase the rate of employment in the country and eventually raise the consumer spending. The Canadians will have more money to spend. Adomait and Maranta (19) claim that money can be used to measure the living standard. For this reason, the amount of money that the Canadians will have after securing jobs due to government expenditure will be a good measure of their standards of living. The increase in consumer spending will facilitate the rise in the aggregate demand and eventually the economic growth. Also, the infrastructure spending by the Canadian government will enhance the country’s infrastructure and also generate positive externalities.
Furthermore, the infrastructure spending by the Canadian government will continue generating the purchasing power. In fact, the purchasing power of the Canadian dollar has improved thanks to the control of the inflation by the new government. Inflation makes money worthless (Adomait and Maranta 62). As a result, the control of inflation has helped preserve the value of the Canadian dollar and prevented the increase in the costs of services and goods. The Canadian government has, thus, played a part in reducing the cost of living for the Canadians. The maintenance of the interest rate at 0.5 percent by the Canada’s central bank has also contributed to the increase in the private-sector investment. Adomait and Maranta (62) assert that inflation rates increase as the rates of interest rise. The maintenance of the interest rate at 0.5 percent implies that the Canadian government and its central bank has also reduced the inflation. Consequently, this has encouraged investment in the private sector.
The new Canadian government has announced its plan on immigration. In particular, this government plans to facilitate the improvement in Canada’s economic growth through welcoming experienced businesspersons and professionals from the foreign countries. In my opinion, this economic immigration will contribute to the long-term growth of Canada as well as enhance its international competitiveness. The presence of numerous skilled and experienced employees in Canada will make the country’s firms invest more. As a result, this will facilitate the economic growth.
In the start of this year, Canada experienced an increase in the consumer prices. This increase followed a considerable growth during the last month of 2015. The new Canadian government played a significant role in this growth. According to Adomait and Maranta (32), the governments work closely with the central banks in their countries to establish stable and safe financial environments. As a matter of fact, the Canadian government through the country’s central bank has maintained the interest rate at 0.5 percent and, as a result, succeeded in keeping the inflation on track. The aim of this government is to work together with the country’s central bank to create a secure financial environment for the investors.
Conclusively, the infrastructure expenditure by the new Canadian government will facilitate the improvement in Canada’s economic performance. Essentially, this expenditure program will reduce the rate of unemployment, raise the private-sector spending, and eventually stimulate the macro economy. I think that the current Canadian government took the country’s leadership at the right time. Nevertheless, the potential for the Canadian government expenditure on the infrastructure to improve the country’s economic growth will depend on some factors. Specifically, it will depend on whether there will be a suitable balance between the maintenance expenditure and the infrastructure expenditure. The Canadian policy makers need to make sure that the two balance to prevent the increase in costs. Besides, it will depend on whether the Canadian government will effectively choose, design, and adopt infrastructure projects.
Works Cited
Adomait, Eveline J, and Richard G. Maranta. Dinner Party Economics: The Big Ideas and Intense Conversations About the Economy. , 2014. Print.
Centre for Spatial Economics, author. Broadbent Institute, issuing body. The Economic Benefits of Public Infrastructure Spending in Canada. , 2015. Internet resource.
