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2006 OECD Economic Surveys: Canada 2006

image of OECD Economic Surveys: Canada 2006

This 2006 edition of OECD's periodic survey of Canada's economy finds strong economic performance but cautions that to maintain this performance, productivity must be increased and social policies must be put on a sustainable path.  After reviewing recent economic developments, the Survey examines the business environment including taxation, product market competition, and capital markets.  It then takes a look at the state of innovation, Canada's innovation strategy, and how to leverage innovation to improve economic performance.  A chapter on fiscal policy and federal-provincial arrangements finds equalisation transfers need to be revamped and that the federal government should step back from trying to steer in areas of provincial responsibility.  The final chapter takes a detailed look at social welfare programmes.

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Assessment and Recommendations

The Canadian economy has continued to deliver excellent results in nearly all respects. Output and employment growth have been robust, while the unemployment rate has fallen to its lowest level since 1974. Inflation remains comfortably under control, and the general government and current account balances are in surplus. Altogether, Canadians enjoy one of the highest living standards in the OECD, a result that reflects the pay-off from good macroeconomic management and the structural reforms put in place. But despite all these positive dimensions, hourly productivity growth in the business sector has been weak in recent years, although it showed a sharp pick-up in 2005.

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