CPA Canada called for broader economic action as the Bank of Canada cut rates
The Bank of Canada moved to lower its benchmark rate by 25 basis points this week – but rate cuts alone aren't enough to ease Canada's economic challenges, according to CPA Canada, which says the government should use the upcoming federal budget as a springboard for broader reforms.
“While rate cuts help, they are only one part of the solution,” David-Alexandre Brassard, CPA Canada’s chief economist, said.
Canada’s federal budget will be released on November 4. The budget is expected to outline the costs of prime minister Mark Carney’s plans to increase spending on defense, housing, and infrastructure.
“To fully support the economy, the federal government needs to take complementary actions—removing barriers to interprovincial trade, supporting labour mobility and directing resources to initiatives that enhance productivity and long-term growth," Brassard wrote.
He highlighted that Canada still lags other advanced economies in productivity and called for federal and provincial governments to work together to eliminate structural inefficiencies and create a more integrated, efficient economy.
The Canadian Federation of Independent Business (CFIB) estimated that current internal trade barriers cost the economy about $200 billion each year.
Trade barriers and housing supply challenges
A Statistics Canada survey found that nearly half of Canadian construction companies cite distance and transportation costs as the main reasons they don’t buy from suppliers in other provinces or territories. They also point to tax differences, permit and licensing issues, and other challenges as barriers.
“Everyone is understandably worried about a recession, but the path to sustainable growth is just as important. By addressing internal trade barriers and strengthening labour mobility, Canada can unlock long-term growth and build resilience against future external shocks,” he said.
A new report from the national housing agency estimates that removing trade barriers between provinces could lead to 30,000 more homes being built each year in Canada.
Rate cut offers limited relief for mortgage holders
The Bank’s decision followed a turbulent summer marked by a 1.6% contraction in GDP and the loss of more than 100,000 jobs, as the effects of the US trade war rippled across sectors and provinces. Yet, for mortgage professionals, the immediate impact of the rate cut was more psychological than financial.
“This rate cut is more about psychology than math. Even a small drop can give hesitant buyers and sellers confidence that the market is stabilizing after years of uncertainty,” Joel Fox, COO at Ownright, said. “We’re already seeing activity pick up, but prices remain well below their 2022 highs — and that gap will take time to close.”
The central bank has two more interest rate decisions scheduled for 2025, and governor Tiff Macklem highlighted the potential impact of the government's fiscal policy on its forthcoming moves.
