MNI POLICY: Canada's Election Focused on Economy Over Populism

--Trudeau and Scheer open campaign with appeals on cost of living

By Greg Quinn

     OTTAWA (MNI) - The upcoming Canadian election in which Prime Minister

Justin Trudeau will face Conservative Leader Andrew Scheer may focus on managing

deficits amid a U.S.-China trade war and helping families deal with rising

housing costs.

     Trudeau seeks a second mandate Oct. 21 as he faces attacks over delayed

energy projects and a new carbon tax, with recent polls showing the two parties

are tied. 

     The leaders will probably avoid a major shift on deficits, allowing the

Bank of Canada to take the lead with rate cuts if the economy weakens, according

to Jean-Francois Perrault. He is chief economist at Bank of Nova Scotia, a

former top official in Canada's finance department and former assistant chief at

the central bank's domestic economics branch. 

     "It's very hard to justify doing something proactive on the fiscal side if

you aren't 100% sure or at least extremely sure you are going to be facing

significant economic challenges," Perrault told MNI. "It's easy for the Bank of

Canada to reverse itself" on stimulus if the economy picks up again, he said.

     A good way to improve family finances would be measures making child care

cheaper, freeing up money for mortgage payments, Perrault said. That has become

an issue with house prices often reaching a million dollars in Vancouver and

Toronto. 

     Trudeau may gain from touting the lowest unemployment rates in decades,

solid wage increases and monthly job gains that are equal to the population of

some medium-sized cities.  "If they wanted to take credit, the facts are that

the labor market is darn strong," Perrault said. 

     "We put more money in people's pockets by cutting taxes for the middle

class, and by raising them for the top 1 percent," Trudeau said in Ottawa

Wednesday after confirming the election date.

     Trudeau's economic weak spot has been the "balance" he has sought between

growing oil exports and a carbon tax. So have delays in approving the TMX

pipeline to send crude oil to Asia -- uncertainty that forced the government to

take over the project.

     For currency investors, this election may extend a pattern of Quebec

separatists failing to win enough seats to hold official federal party status.

     The next government will also approve the next Bank of Canada Governor as

Stephen Poloz's seven-year term ends in June.

     Scheer said his campaign will focus on "putting more money into the pockets

of Canadians, to improve their daily lives." 

     Scheer also said Trudeau "has lost the moral authority to govern," a

reference to allegations of interference in a criminal corruption case involving

the construction firm SNC-Lavalin. Trudeau has said his actions in the case were

aimed at saving jobs at the company.

     The SNC-Lavalin case threatens to overshadow a strong economic record.

Trudeau's trade team led by Chrystia Freeland renewed the Nafta agreement after

Donald Trump's threats to rip it up, unemployment hit record lows this year and

the economy is growing at nearly a 4% pace. The election results aren't expected

to bring any fresh Canadian demands for further changes to the USMCA agreement

that's now also before Congress for ratification. 

     The winner must win a majority of the 338 seats in the House of Commons to

pass budgets and legislation without opposition support.

--MNI Ottawa Bureau; +1 613-314-9647; email: greg.quinn@marketnews.com

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