While Canadians won’t hit the polls until October, it’s safe to assume that the economy—and people’s pocket books—will be a top election issue. As federal parties continue rolling out their platforms, we can tell from past history which ones might be able to kick-start our struggling GDP and get our investments in gear.
On the surface, neither Liberal nor Conservative governments have actually had much of an impact on the Canadian stock market, says Perry Sadorsky, an associate professor at the Schulich School of Business. Going back to 1950, the market’s equity risk premium is 4.5%, and it seems to make no difference who’s occupying 24 Sussex Drive. However, the Canadian economy is in a funk right now—possibly even in a recession—and that’s putting pressure on jobs and wages.
Boosting economic growth takes infrastructure spending, not deficit reduction—and in that case the NDP (which says it will lower the small business tax rate from 11% to 9%) and the Liberals (who have promised to spend $200 million a year in clean technology investments) may be better for your portfolio. “The current government is fixated on balancing the budget so it can’t do any fiscal expansion,” notes Sadorsky.
Ian Russell, head of the Investment Industry Association of Canada, has a different view. Government spending won’t help Canadians, he says, but giving them better options on how they can save their own money will. To that end, the Conservatives have been better for investors. For one, Stephen Harper introduced the TFSA in 2009 and then upped annual contributions from $5,500 to $10,000 this year. His party has also lowered the RRIF’s minimum withdrawal rate.
“The Federal government has unshackled the tax system,” says Russell, who expects the Conservatives to throw more bones to savers in the future—and believes other parties will inevitably follow suit.
But Sadorsky says it doesn’t matter whose pushing the initiative. “A political party can say they’re going to increase saving accounts or offer more subsidies, but those impacts are never as direct as going out and building something.”