Economic History of Canada - Recent Years

Recent Years

Canada experienced economic recession in the early 1980s and again in the early 1990s. This led to massive government deficits, high unemployment, and general disaffection. The poor economy helped lead to the overwhelming rejection of the Progressive Conservative Party in the 1993 election, and the fall of other governments such as Bob Rae's Ontario New Democratic Party. The poor economy may have increased support for sovereignty in Quebec, an option that was just barely rejected in the 1995 Quebec referendum.

A brief recovery in 1994 was followed by an economic slump in 1995-1996. Since that date, the Canadian economy has improved markedly, in step with the boom in the United States. Once referred to as a fiscal basket-case, Canada has become a model of fiscal stability as the government has posted surpluses every fiscal year from 1996 to the 2008 recession.

The recession brought on in the United States by the collapse of the dot com bubble beginning in 2000, hurt the Toronto Stock Exchange but has affected Canada only mildly. It is one of the few times Canada has avoided following the United States into a recession.

Following this downturn, Canadian economic growth has been concentrated in the petroleum, real estate and income trust sectors.

Canada's health-care system, colloquially called "Medicare", is a significant economic factor. As most aspects of the health-care system are financed from general government revenues, and as provincial governments bear the majority of these costs, health-care has grown to become the largest component of Canadian provincial budgets. Medicare is also a relevant factor in the decisions of employers to locate businesses in Canada (where government pays most of employees' health-care costs) as opposed to the United States (where employers are forced to pay most of these costs).

Poverty in Canada remains a prevalent issue within some segments of society. The most frequently quoted measure, the low-income cut off or LICO, displays a downward trend since 2000 after a spike in the mid-1990s and is 10.8% as of 2005. Another measure, published by the free market think tank Fraser Institute, displays a constant downward trend since 1970 and stands at 4.9% as of 2004. There is a debate about which measure is more valid.