The great GDP wars - who won? who lost?

It’s kind of fun to watch journos and the general public back and forth on GDP growth. Is the Higgs government killing it? Have they underspent and hurt the economy?

Let’s look at real GDP growth by expenditure area. For the purposes of the analysis I take three time periods roughly aligning to the Alward, Gallant and Higgs governments.

Everyone realizes that Alward was in at a rough time. Exports were in decline, business investment was dropping, even government spending was in decline (in real terms). So the overall real GDP growth over the four year period was negative (-1%). Fixed capital formation is roughly ‘investment’. Consumption is consumption.

The Gallant government saw some improvement. Government consumption rose by more than 10% over the four years (not annual growth, over the four years). Capital formation (investment) turned around in both the public and private sectors. Exports were still down over the four year period. Between 2014-2018 real GDP rose by 5.1% or about 1.3% per year.

The Higgs government saw record population growth but also went through an unprecedented pandemic. It’s hard to compare apples-to-apples. But comparing 2022 to 2018, government consumption increased even faster than during Gallant (+12% in real terms) - that is not just provincial government. The big concern is annual non-residential investment in structures, machinery and equipment which is down 15% between 2018 and 2022. Government investment dropped from $1.87 billion in real terms in 2018 to $1.33 billion in 2022 - 28.5%. For old timers, government invested an average of $1.9 billion per year between 2007 and 2012.

So, I would say there are no ‘winners’ here - the growth rate has picked up from the ‘lost decade’ but export growth is still a serious challenge as is public and private sector capital formation (investment).