This Survey is published on the responsibility of the Economic and Development Review Committee of the OECD, which is charged with the examination of the economic situation of member countries.The economic situation and policies of Canada were reviewed by the Committee on 14 May 2018. The draft report was then revised in the light of the discussions and given final approval as the agreed report of the whole Committee on 28 May, 2018.The Secretariat’s draft report was prepared for the Committee by Mr. David Carey and Mr. Andrew Barker under the supervision of Mr. Peter Jarrett. Research assistance was provided by Ms. Isabelle Luong. Ms. Heloise Wickramanayake formatted and produced the layout. The previous Survey of Canada was issued in June 2016.Information about the latest as well as previous Surveys and more information about how Surveys are prepared is available at www.oecd.org/eco/surveys

Economic growth remains buoyantWell-being in Canada is high.Economic growth has eased back to potential rates since mid-2017 following problems in pipeline capacity.Macroeconomic policies are becoming less expansionary.GDP growth is projected to remain fairly robust.The greatest uncertainty in the outlook relates to increased global trade restrictions.High house prices create risksIn recent years, house prices have soared.Household debt has expanded alongside house prices, exceeding 170% of disposable income.A series of macro-prudential measures since 2008 have mitigated housing market risks.Unaffordability and affordable housing shortages raise inclusiveness issues.Workforce inclusion can be improvedThe federal government is working hard to improve female labour market outcomes.Initiatives underway to improve labour market information offer benefits especially for youthLater retirement can be supported through flexibility in working hours and skills development.Immigrant labour market integration lagsImmigrants earn less than the comparable native-born.Immigration policy has been changed to select immigrants with better earnings prospects.Canada has an extensive array of programmes that facilitate integration.More should be done to raise productivityHourly labour productivity continues to lag behind the upper half of OECD countries.Implementing past OECD recommendations would increase productivity.

Recent developments, macroeconomic policies and short-term prospectsThe housing boomFiscal sustainabilityInclusiveness for women, youth and seniorsImmigration policyReforms to increase productivityEnvironmental sustainability

This Annex reviews actions taken on recommendations from previous Economic Surveys that are not covered in tables within the main body of the Assessment and Recommendations. Recommendations that are new to this Survey are listed at the end of the Executive Summary and the relevant chapter.

Women, youth and seniors face barriers to economic inclusion in Canada, with considerable scope to improve their labour market outcomes. There has been no progress in shrinking the gender employment gap since 2009, and women, particularly mothers, continue to earn significantly less than men, in part due to a large gap in unpaid childcare responsibilities. Outside the province of Québec, low (but increasing) rates of government support for childcare should be expanded considerably, as should fathers’ low take-up of parental leave. Skills development should be prioritised to arrest declining skills among youth and weak wage growth among young males with low educational attainment. Fragmented labour market information needs to be consolidated to address wage penalties associated with the widespread prevalence of qualifications mismatch. Growth in old-age poverty should be tackled through further increases in basic pension payments over time. Linking changes in the age of eligibility for public pensions to life expectancy would boost growth by increasing employment of older Canadians still willing and able to work. For all three groups, well-targeted expansions of in-work tax benefits and active labour market spending have the potential to increase employment.

Canada’s immigration policy aims to promote economic development by selecting immigrants with high levels of human capital, to reunite families and to respond to foreign crises and offer protection to endangered people. Economic-class immigrants, who are selected for their skills, are by far the largest group. The immigration system has been highly successful and is well run. Outcomes are monitored and policies adjusted to ensure that the system’s objectives are met. A problematic development, both from the point of view of immigrants’ well-being and increasing productivity, is that their initial earnings in Canada relative to the native-born fell sharply in recent decades to levels that are too low to catch up with those of the comparable native-born within immigrants’ working lives. Important causes of the fall include weaker official language skills and a decline in returns to pre-immigration labour market experience. Canada has responded by modifying its immigration policy over the years to select immigrants with better earnings prospects, most recently with the introduction in 2015 of the Express Entry system. It has also developed a range of settlement programmes and initiatives to facilitate integration. This chapter looks at options for further adjusting the system to enhance the benefits it generates.