Michael Campbell, host of business radio show MoneyTalks and senior business analyst for BCTV News on Global, gave his thoughts on the state of Canada and B.C.’s economics during his keynote address at this year’s CanaData West Economic Forecast Conference in Vancouver. Campbell first explained factors that go into making predictions.
"The key point is this. We are in a really different world right now, and you can’t really use the analytical tools that we used to see what’s going on," he said. He explained that international factors are far more important than domestic ones.
He noted that many issues the country faces are created outside its borders. For example, Alberta doesn’t control oil prices yet $46-a-barrel oil is having a huge impact.
"I think domestic policies certainly play a role but it is within this international context," he said. Campbell also sees central banks having a huge impact on the fate of markets due to what he sees as manipulation. "We are trading on central bank policy, we aren’t trading fundamentals, how a company is doing anymore, or even commodity prices, we are trading first and foremost what the next move by the central bank will be," Campbell said.
According to Campbell, there are three keys to understanding what is going on in the global economy. First, there is the flow of money due to a decline in the confidence of government. Money is moving from problem areas, like China, to perceived safer jurisdictions, like New York, London and Vancouver.
"We see this in Vancouver," Campbell said. "The big mover of upper end real estate has been international money coming in … we have become an attractive place to park your money."
Second, Campbell said we live in a deflationary environment. Canada has been serially disappointing, China has had 43 months of prices going down and the impact on our world is huge.
"When China has that big sneeze, that is why everyone catches a cold," he said. "Natural resources and oil are having problems in this country and that’s not going to change. It is part of this deflation and part of that deleveraging that we are seeing."
Third, Campbell scolded government for failing to address these problems. He said that rather than taxing its way out of financial woe, government needs to work to grow the private sector.
"During the last two years in the country, every province and every major municipality has raised taxes. And then they turn around and ask why economic growth isn’t that good," he said. "That is what we are dealing with."
Campbell explained that governments around the world are strapped for cash and are looking to taxpayers to find it. "Given a choice between you changing and them changing, they choose you," he said. Campbell said it is problematic how easily the province and country rejects growth, like in the natural resource sector. "We are saying ‘no’ to virtually every major resource project," he said noting road blocks like higher tax and more regulation. However, B.C. is in a good position. Campbell said the province is attracting foreign investment and people are migrating there. It also has a growing tech industry. "In the next few years, there’s only going to be a few winners and we have to be determined to be one of them," he said.
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