On 8 June 2012, the House of Commons Standing Committee on Finance launched the pre-budget consultations for 2012, and individuals and organizations were invited to share their thoughts online by responding to five questions:

• on the issue of economic recovery and growth: Given the current climate of federal and global fiscal restraint, what specific federal measures do you feel are needed for a sustained economic recovery and enhanced economic growth in Canada?
• on the issue of job creation: As Canadian companies face pressures resulting from such factors as uncertainty about the U.S. economic recovery, a sovereign debt crisis in Europe, and competition from a number of developed and developing countries, what specific federal actions do you believe should be taken to promote job creation in Canada, including that which occurs as a result of enhanced internal and international trade?
• on the issue of demographic change: What specific federal measures do you think should be implemented to help the country address the consequences of, and challenges associated with, the aging of the Canadian population and of skills shortages?
• on the issue of productivity: With labour market challenges arising in part as a result of the aging of Canada’s population and an ongoing focus on the actions needed for competitiveness, what specific federal initiatives are needed in order to increase productivity in Canada?
• on the issue of other challenges: With some Canadian individuals, businesses and communities facing particular challenges at this time, in your view, who is facing the most challenges, what are the challenges that are being faced and what specific federal actions are needed to address these challenges?

To at least some extent, a number of the responses were influenced by the domestic and international economic environment, the level of employment, Canada’s population aging and the nation’s productivity performance.

In its World Economic Outlook: Coping with High Debt and Sluggish Growth, the International Monetary Fund (IMF) estimates that the global economy’s gross domestic product (GDP) growth rate will be 3.3% in 2012 and 3.6% in 2013, down from 5.1% in 2010 and 3.8% in 2011; the rate for advanced economies is expected to be relatively lower, at 1.3% in 2012 and 1.5% in 2013. While monetary policies in a number of countries seem to be designed to stimulate economic growth, some governments are engaging in fiscal restraint and/or are facing continued uncertainty, with negative implications for economic growth. According to the IMF, Canada — whose economy is doing well compared to other countries — has the lowest public debt-to-GDP ratio among the Group of Seven (G7) nations. However, the IMF feels that fiscal challenges in the euro area and in the United States are the main risks to the global economic outlook. Both the IMF and the Organisation for Economic Co-operation and Development (OECD) predict that, in 2012 and 2013, Canada will have among the highest rates of economic growth in the G7.

Canada’s economy is part of the global economy. According to Statistics Canada, year-over-year growth in Canada’s real GDP declined from a rate of 3.0% in the first quarter of 2011 to 2.0% in the second quarter of that year, and remained in the 2.0% to 3.0% range through to the second quarter of 2012. Although Canada’s small, open economy remains sensitive to economic, financial and fiscal challenges in other countries, IMF data suggest that the Canadian economy grew at a faster rate than most advanced economies in the first half of 2012 and that the nation’s economy is expected to continue to grow in the short term. That said, the growth is predicted to be hampered by weak growth in the global economy, by higher-than-expected commodity prices and by an inability to increase consumer spending due to high levels of consumer debt. According to the IMF’s projections, the Canadian economy will grow by 1.9% in 2012 and by 2.0% in 2013.

With more than 880,000 net new jobs created since July 2009, Canada has had one of the highest rates of employment growth among the G7 nations; the country has had a positive growth rate since the first quarter of 2010 and, in the third quarter of 2012, the country’s unemployment rate remained stable, at 7.3%. According to Statistics Canada, employment in Canada — which decreased during the recession that began in 2008 — reached its pre-recession level in January 2011 and has since surpassed that level, with an additional 338,000 people employed as of September 2012; on a net basis, this employment growth has been in full-time positions.

For some time now, the Canadian population has been aging, a situation that can be explained by two factors: a declining birth rate and rising life expectancy. According to Statistics Canada, Canada’s annual population growth rate increased after 1945, reaching 3.9% in 1959 before falling below the generational replacement rate of 2.1% in 1972 and continuing to decrease to an historical low of almost 0.8% in 1998 before rising to about 1.7% in 2008 and falling to 1.1% in 2010. Furthermore, between 1961 and 2006, life expectancy at birth in Canada rose from 68 to 78 years for men and from 74 to 83 years for women. Statistics Canada estimates that, in 2036, life expectancy at birth will be between 82 and 85 years for men and between 86 and 88 years for women. As a result, Statistics Canada anticipates that, with current demographic trends, the number of Canadian seniors could double between 2011 and 2033, rising from about 5 million to 10 million. Moreover, the proportion of working-aged people to seniors could diminish relatively rapidly, from 4.9 to 2.6, with implications for the ability of governments to support seniors.

Productivity enables a nation to enhance its economic growth. For example, it permits more goods to be produced and/or services to be provided with the same quantity of resources. For a number of years, Canada’s productivity growth rate has lagged that of its major trading partners, including the United States. According to OECD data for the 2000 to 2009 period, Canada’s labour productivity growth rate — at 0.6% — was less than one half of the average of OECD member countries, at 1.5%. On 17 October 2011, in a report entitled Innovation Canada: A Call to Action, innovation was highlighted as a solution to Canada’s relatively poor productivity performance.

The witnesses’ proposals and the Committee’s recommendations might be viewed with this economic environment, level of employment growth, population aging and productivity performance in mind. Chapter 2 of the report summarizes the comments made to the Committee by the Bank of Canada about the nation’s economic environment and the views of witnesses on the federal fiscal environment; in some sense, an examination of the economic and fiscal environments provides a context for the three subsequent chapters. Chapter 3 presents the testimony received by the Committee in relation to people, while the witnesses’ views about businesses are contained in Chapter 4. Recognizing that Canada’s people and businesses live and operate respectively in communities, the proposals made by witnesses on this topic are included in Chapter 5. The Committee’s recommendations are provided in Chapter 6, and Chapter 7 contains the report’s conclusions. Finally, for each of the five questions noted earlier, the report’s Appendix identifies the topics about which individuals and organizations submitted comments and/or proposals for change. It should be noted that, while the pre-budget consultations were under way, the Committee also held hearings in relation to a study of tax incentives for charitable giving; a report and recommendations will be presented early in 2013.