Jock Finlayson is executive vice president and chief policy officer of the Business Council of BC. (Submitted)

COLUMN: B.C.’s biggest economic and business stories of 2019

Jock Finlayson is executive vice president and chief policy officer of the Business Council of BC

As the new year beckons, it’s a good time to reflect on the major economic and business stories of the year that’s about to end. To keep the task manageable, the focus here is limited to Canada and B.C.

One surprising development in 2019 was the return to a period of falling interest rates.

When the year began, most economic forecasters were expecting both the Bank of Canada’s policy rate and market-based interest rates to continue creeping higher, on the heels of earlier rate increases in 2018.

Instead, the interest rates facing savers and borrowers dropped over the last half of 2019 – not just in Canada, but in the U.S. too.

As of late November, the market yield on 10-year bonds issued by the federal government stood at a paltry 1.6 per cent.

With inflation running around two per cent, this means buyers of 10-year government bonds are locking in a negative return after inflation. That would appear to be an unappetizing investment. Yet there is no shortage of demand for government bonds yielding microscopic returns.

READ MORE: Bank of Canada holds interest rate, warns economy’s resilience to be ‘tested’

Another notable story in 2019 was the continued troubles afflicting the Western Canadian energy sector, above all the oil and gas industry that accounts for up to one-fifth of Canada’s exports in a typical year.

While the Canadian industry has been innovating and cutting costs in an environment of lower prices, escalating government-imposed regulatory burdens, stalled pipeline development, and rising oil and gas production in the United States mean the overall energy landscape has shifted in ways that disadvantage Canada.

The result is tens of billions of dollars of foregone economic value because of persistent price discounts on Western Canadian oil vis-à-vis oil produced in the U.S., significant job losses in the Alberta energy patch, investment outflows to the U.S., and the departure from Canada of at least one major energy company head office – Encana – with more likely to follow.

All in all, energy policy and recent energy investment patterns show Canada in an unflattering light.

KEEP READING: Encana moves headquarters from Calgary to U.S., changes name to Ovintiv

For B.C., the crisis gripping the forest industry is clearly top of mind.

More than a dozen lumber manufacturing plants in the interior and north have stopped operating – some permanently. Thousands of well-paying jobs have disappeared, and more are at risk. Lumber production and export shipments are down significantly compared to 2018 levels, helping to drive a decline in B.C.’s total exports.

The NDP government has responded by providing some assistance to some laid-off forest workers and forestry-dependent communities. But it seems curiously indifferent to the long-term economic health of the province’s most important export industry.

Policy-makers are overlooking the fact that a viable B.C. forest industry depends on the presence of strong companies with the size and scale to withstand market cycles and invest in developing new markets and in keeping existing mills efficient.

It is troubling to watch the leading firms redeploying capital and shifting management attention to other provinces and the U.S.

READ MORE: Fewer trees, higher costs blamed for devastating downturn in B.C. forestry

Finally, there is housing. The past year brought a sharp decline followed by a jump in home sales, as the market adjusted to an onslaught of new and higher provincial taxes, the mortgage “stress test” introduced by the federal government, and other policy measures designed to cool demand and dampen speculation in the Lower Mainland, Greater Victoria, and the Kelowna area.

Housing prices have dropped markedly at the expensive end of the market, but much less so for the average property.

Homebuilding and housing starts in 2019 have been surprisingly resilient, considering the contemporaneous unwinding of froth in the market.

Some industry experts are forecasting a sizable decline in housing starts in 2020, as developers shelve or delay projects against the backdrop of recent policy measures. If starts do plunge, that will detract from economic growth in B.C. in 2020 and beyond.

But with rock-bottom interest rates and a rapidly growing population fueled by record levels of immigration, the demand for housing in “urban B.C.” is expected to remain elevated – a situation that should continue to support the development of new housing supply over the medium-term.

Jock Finlayson is executive vice president and chief policy officer of the Business Council of British Columbia

Like us on Facebook and follow us on Twitter

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Comments are closed

Just Posted

Gallery 2 reopens, offers video summer activities

The hand-washing sequence and the people-packed panoramas on display offer new interpretations

Mills oppose Celgar’s ask for cheaper logs destined for chipper

The Castlegar mill has asked the province for a lower rate for any log that goes straight to pulp

QUIZ: Put your knowledge of Canada to the test

How much do you know about our country?

$335K spent on Boundary flood protection for 2020 freshet

The RDKB and City of Grand Forks are submitting their receipts to the province

Province releases report on Columbia River Treaty public feedback

Reservoir levels, fair compensation for impacted communities, among many issues raised

UPDATE: Military reservist facing 22 charges after allegedly ramming gates at Rideau Hall

The man, who police have not yet officially identified, will be charged with multiple offences

Alberta health minister orders review into response after noose found in hospital in 2016

A piece of rope tied into a noose was found taped to the door of an operating room at the Grande Prairie Hospital in 2016

B.C.’s major rivers surge, sparking flood warnings

A persistent low pressure system over Alberta has led to several days of heavy rain

B.C.’s Indigenous rights law faces 2020 implementation deadline

Pipeline projects carry on as B.C. works on UN goals

Nelson cyclist run over by truck

Driver ticketed for failing to yield right of way on left turn

‘Mind boggling’: B.C. man $1 million richer after winning Lotto 6/49 a second time

David O’Brien hopes to use his winnings to travel and of course keep playing the lottery

White-throated sparrows have changed their tune, B.C. study unveils

Study marks an unprecedented development scientists say has caused them to sit up and take note

B.C. teacher loses licence after sexual relationships with two recently-graduated students

The teacher won’t be allowed to apply for a teaching certificate until 2035

Lower Mainland teacher facing child pornography charges

Elazar Reshef, 52, has worked in the Delta School District

Most Read