Document Information

Date: 1978-08-09
By: William G. Davis
Citation: 19th Annual Premiers’ Conference, Remarks by the Honourable William G. Davis, Premier of Ontario, On the Economy, Doc 850-10/009 (Regina/Waskesiu: 9-12 August 1978).
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DOCUMENT: 850-10/009
19th ANNUAL PREMIERS’ CONFERENCE
REMARKS BY
THE HONOURABLE WILLIAM G. DAVIS
PREMIER OF ONTARIO
ON THE ECONOMY
Regina/Waskesiu
August 9-12, l978

THE ECONOMY
There are encouraging developments on the economic front, and a
number of undesirable trends and imbalances have been corrected over the last
couple of years, Nonetheless, the combination of high unemployment and rapid
inflation persists in Canada.
We are all well aware that Canada’s unemployment rate has risen
steadily over the last three years. In June 1978, over 900,000 Canadians were
unemployed. Moreover, the hardship has hit some groups and regions more
severely than others. Among our youth, the unemployment rate has been more
than two-and-a-half times that for adult males. The average unemployment
rate for adult women has been close to twice that for adult males.
Geographically, the Atlantic Provinces and Quebec have experienced
considerably higher rates than the national average; within each province we
have areas where the unemployment rate is also well above the national
average.
We are not alone in this experience. A deterioration in labour market
conditions has been felt by most other industrial countries. Unique to Canada,
however, has been the rapid growth in our labour force. Our expansion rate has
been nearly double that of any other major nation, fueled by a surge in the
number of young people entering the labour market and changes in social
attitudes that have pushed up the proportion of women seeking jobs.
Inflation has also been disconcertingly resistant. The impact of the
decline in the dollar last year is filtering through via higher import prices.
Food prices have skyrocketed as a result of drought conditions and the shortage
of beef. Energy price increases have further aggravated the situation. As we
emerge from the Anti-Inflation Program, this raises considerable concern.
Despite these problems, however, there are several hopeful signs that
we are working our way of the basic difficulties of the recent past.
The job creation picture has been very impressive. in June of this year,
there were 356,000 more Canadians with jobs than a year earlier. By
international standards, Canada has performed well. From 1973 to 1977, new
job creation in Canada was faster than in the OECD nations, and greatly
outpaced the rate of growth in the U.S. and Japan. The prospects for continued
robust employment gains, combined with some deceleration in labour force
growth, should help to alleviate unemployment problems.
On the price side, some encouragement can be taken by the trend in the
underlying rate of inflation. Excluding erratic food components and direct
energy costs from the CPI, there has been a declining trend in the rate of
inflation since early 1976. The deceleration is due in part to the success of the
Anti~In;flation Program in restraining our expectations and the cost of those
goods and services which go unchecked by international competition.
Labour cost increases have experienced a similar moderation. Base
wage rate gains peaked in the second quarter of 1975, and have been steadily
reduced. Expectations have been lowered as a result of the controls program
and the persistence of high unemployment rates. Cost pressures are likely to be
further abated by healthy productivity gains forecast for next year.

The drop in the Canadian dollar to a more realistic level, relative to
both the U.S. and our other major trading partners, has reinforced our success
in restraining domestic prices and costs. The improvement in our competitive
position has already had a major impact on improving the medium-term
prospects for Canadian industry abroad.
Export strength has been accompanied at home by a pick-up in retail
sales. We have apparently been successful in our joint efforts to spur Canadian
consumers with the temporary sales tax cuts. Moreover, the higher price of
imports has shifted demand towards domestic goods. We have made some
headway towards improving the visibility and image of Canadian goods with the
national “Shop Canada” program. Recent gains in demand for Canadian goods
have led to marginal improvement in business confidence and should boost
investment expenditures next year.
The improvement over 1977 performance, however, will likely be
insufficient to move the Canadian economy up to its potential, leaving the
unemployment rate at a high level. Nonetheless, the slack in the economy,
combined with an abatement of food price pressures, will contribute to some
moderation in the inflation rate.
The slow recovery of profits and the uncertainties that current GATT
negotiations have introduced into the international trading climate have
contributed to the persistence of slow growth. Meanwhile, domestic economic
policies have left industry poorly prepared for the challenge of competing in a
tough world market.
Conference
At the February Conference of First Ministers, deliberations focussed on medium-
term targets for the economy and the framework and sectoral policies which
would contribute to a climate encouraging private sector initiative. Those
targets are admirable ones, but the clear implication of the federal
government’s paper on medium-term targets is that their attainment is simply
not possible without co-ordinated structural change.
I was encouraged last week to hear the Prime Minister’s commitment to
a series of broad policies which the Federal Government would pursue. To the
cynical these intiatives were simply a package to which Ottawa has paid lip
service in the past. I am prepared to accept the commitment at face value,
however, and l look forward to hearing the details of these proposals.
I was pleased to see that the Prime Minister has picked up on Ontario’s
theme of restraint, and has undertaken to make significant headway in reducing
the size of the federal bureaucracy and the demands it places on Canadians. I
would hope, too, that he is prepared to take action to deploy federal resources
more effectively. Ontario has suggested a number of specific areas where we
believe a redirection of federal spending is required. The fishing industry, the
railways and shipbuilding are particular sectors where we believe benefits can
accrue across Canada. We have proposed a program to utilize more effectively
the nearly $2 billion Ottawa spends annually supporting the Unemployment
Insurance Fund. We have yet to receive any response to these proposals from
the Government of Canada. They are issues which I believe should receive
priority attention from our Finance Ministers.

it is not likely that they can easily be dealt with here, or at our annual
meeting with the Prime Minister. But consultations and a substantial number of
meetings taking place at the officials’ level, while useful, are insufficient to
ensure action and follow-up on the structural reform necessary to achieve the
targets. We need a forum of responsible Ministers to maintain the momentum
established in February and to set priorities between First Ministers‘ meetings.
The Ministers of Finance were given the major responsibility of
forwarding framework discussions following February meeting. They have the
collective responsibility for the country’s fiscal and economic health. They,
perhaps assisted by their respective colleagues responsible for economic policy,
are the logical group to discuss the basic economic framework and co-
ordination of priority economic issues.
This group would be able to undertake vigorous action to meet the
concerns raised by First Ministers at an annual meeting on the Economy.
This group would present, for the consideration of First Ministers, a
gomprehensive but managerabie agenda for further discussion and
ecision.
At the upcoming First Ministers’ meeting in November, the
Premiers as a group, should recommend that such a forum for discussion
on the economy be organized quickly.
Economic reform is as essential to our national vitality as is
constitutional reform to our sense of national purpose. The speedy
timetable which the Prime Minister has set to deal with the constitution
is in sharp contrast to the slow and uneven pace in dealing with basic
reform of Canada’s economy. I believe we must recognize the shared
priority and shared goal of these two efforts.