Faced with headlines trumpeting rising financial stress, growing political polarization and looming climate calamity, Canadians may be understandably gloomy. Yet, a new report from Scotiabank argues that reality is much brighter than perception, and, without an attitude adjustment, negativity could become a self-fulfilling prophecy.
Based on sentiment readings, such as the Conference Board of Canada’s confidence index and Bloomberg’s Economic Mood Index, Canadians haven’t been this unhappy since the global financial crisis, the report noted. Nor do business surveys hold much optimism.
While there is some basis for these negative feelings, such as persistent recession fears, high inflation, interest rates and housing costs, there’s also a risk of the country talking itself into a relentless slump, the report warned.
“Sentiment essentially acts as the grease — or the sand — to consumption and investment decisions,” the report said.
“When households have job security and a positive view of the economy, they tend to spend and invest more.”
Similarly, businesses with rosy outlooks are more likely to invest and seek growth.
The opposite also holds: Gloomy outlooks are likely to result in increased caution, stalling growth.
It’s not just the economy and the state of household finances that have cast a pall over the country.
“There has been a marked decline in overall life satisfaction,” the report said.
This is particularly evident “among marginalized communities and, increasingly, younger Canadians,” it said.
Mental health readings have been in decline, and public trust in institutions has eroded too, it noted.
Yet, the report argues that intensely gloomy outlooks are not entirely warranted.
Household net worth is up about 25% since the pandemic, it noted. And gains have been enjoyed widely, across all age groups and income levels.
Incomes are up as well.
“Real disposable income sits above 2019 levels for working-age Canadians across all income brackets,” the report said.
Also, measures of income inequality have improved and are “more favourable than pre-pandemic levels.”
While there are certainly major challenges facing the country, the report argues that stoking negativity won’t help.
“There is risk that near-term pessimism morphs into medium-term paralysis,” it said. “A zero-sum culture hinders anything but minor tweaks at a time when sweeping transformations are necessary — such as overhauls in tax and transfer systems, extensive reforms in health and education, rightsizing governments, or a revitalization of cooperative federalism.”
Instead, the report argues that the country needs “a new narrative that fosters rational optimism.”
“This dialogue should promote progress, foster opportunities, celebrate success, and reward risk taking, all while being anchored in factual realities on the ground,” it said. Further, “an inclusive vision is crucial, one that promotes empowerment rather than entitlement.”
“The alternative — and the path we’re on — is continuing to talk ourselves into decline. In that case, it may not get much better than this,” it warned.