The world sees Canada as a storehouse of natural resources.
And it is.
This week, a special report drafted by TD Bank Financial Group confirms the majority of Canadian jobs, income and economic output is tied to the production of resources.
The resource sector is so strong and diverse there are few nations in the world that can touch us, according to the bank’s senior economist and associate vice-president Derek Burleton.
Resource extraction is responsible for one million Canadian jobs. Only the nation’s financial-services sector employs more people.
Resource industry accounts for 13 per cent of Canada’s real gross domestic product. That’s the final market value of all goods and services produced by the economy. (If you want to do the math, it’s fairly simple: take all the nation’s consumption, add national investment, government spending and its exports, then subtract its imports.)
Resources provide the nation with the lion’s share of its capital spending, exports and government revenues.
Its resource companies rank among the nation’s largest companies.
And over the last few years, that influence has grown.
Today, one fifth of all the world’s exploration expenditures target Canada — it rakes in more of that investment than any other nation in the world.
In virtually every key resource known to man, Canada produces more than any other nation in the world.
“There are perhaps a few other nations that might compete with Canada in terms of diversity and size of resource wealth, such as Russia,” said Burleton. “But if you take into account this country’s low political risk and open access to the US market, Canada is second to none.”
Feeling proud yet?
Well, hang on minute.
Though the future looks pretty rosy, there are signs of blight out there.
Earlier this month, David Dodge, Canada’s central banker, admitted he’d overestimated the nation’s financial outlook.
A high loonie, rising energy prices and competition from abroad is expected to sap economic growth.
And the US economy is starting to founder.
Its housing market is beginning to tank, widely seen as a harbinger of widespread economic malaise, so Americans will be buying fewer of those Canadian resource exports.
And, because the nation’s resource industry is so huge, even small decreases in commodity prices can clobber the economy.
But, because Asia is hungry for resources, commodity prices are expected to remain high, which might shield the country from the worst effects of a US recession.
Still, things are going to slow down a bit.
Ottawa is expected to take a financial hit.
That’s going to force Stephen Harper’s Conservative government to examine its planned tax cuts and, probably, to spend less.
That will have ramifications for Canada’s poorer regions, which are more dependent on federal largesse.
And make no mistake, the Yukon is one of those places.
Despite all the hoopla about its economy and wealth of resources, the territory is a basket case when it comes to a self-sustaining economy.
And it may have missed the last resource boom.
According to TD’s report, as a measure of relative importance natural resource revenues make up a measly three per cent of the Yukon’s gross domestic product.
By comparison, the NWT government currently gets 42 per cent of its GDP from resource revenues.
In fact, the only places that receive less money from natural resources are PEI, which has no resource potential to speak of, and Nunavut, the nation’s most remote and least developed jurisdiction.
What can be pulled from the bank’s report is that the last few years have been heady days in the Canadian resource market.
The Yukon hasn’t managed to tap into that windfall. There are still no operating hardrock mines in the territory.
Now, over the next year, with the US economy starting to weaken, demand for Canadian resources will slack off.
That’s probably going to hit the Yukon twice.
It will diminish enthusiasm for its high-cost-of-extraction mineral resources.
And it’s going to dampen the flow of cash from Ottawa. (RM)