OPINION: Five key issues — besides Trump tariffs — the Carney government should tackle

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On Tuesday in Ottawa, Prime Minister Mark Carney unveiled his new cabinet, consisting of 28 ministers and 10 secretaries of state. They have their work cut out for them. In addition to President Donald Trump’s trade war, the Carney government must tackle several other critical issues that have persisted long before Trump was re-elected.

First and foremost, the Carney government should address stagnant living standards for Canadians. From the beginning of 2016 to the end of 2024, per-person gross domestic product (GDP) — a broad measure of living standards — grew by only 2.5% in Canada compared to 18.7% in the United States (all figures adjusted for inflation). While U.S. tariffs threaten to further reduce living standards in Canada, the marked decline began almost a decade ago.

There’s a similar gloomy story in worker incomes as Canadians continue to fall further behind their American counterparts.

According to the latest data, median employment earnings (in Canadian dollars) in all 10 provinces ranked lower than in every U.S. state in 2022 — meaning Americans in low-earning states such as Mississippi ($42,430), Louisiana ($43,318) and Alabama ($43,982) typically earned higher incomes than Canadians in the highest-earning province of Alberta ($38,969).

Why is this happening?

Part of the problem is the state of federal finances. Even Carney has criticized the Trudeau government’s approach to spending increases and debt accumulation, which diverts taxpayer dollars away from programs and towards debt interest payments, and burdens younger generations with higher taxes in the future. But unfortunately, according to Carney’s election platform, his government plans to borrow $93.4 billion more over the next four years compared to the Trudeau government’s last spending plan. The prime minister and his new cabinet should rethink this approach before tabling their first budget.

The Carney government should also cut taxes. Canadians in every province face higher combined (federal and provincial) personal income tax (PIT) rates than Americans across various income levels in virtually every U.S. state. Canada’s PIT rates are similarly uncompetitive compared to other advanced countries. High taxes impose a burden on families, but they also make it harder for Canada to attract and retain high-skilled workers (e.g., doctors, engineers), entrepreneurs, and investment, which drives economic growth and prosperity.

Finally, the Carney government should meaningfully address Canada’s housing affordability crisis. Housing costs have risen dramatically due to a significant gap between the demand for houses and the supply of housing units. In 2024, construction began on 245,367 new housing units nationwide while the population grew by 951,717 people, due in part to one of the highest levels of immigration in Canadian history. This problem has been growing for decades — housing starts per year have remained stuck at essentially the same level they were in the 1970s, while annual population growth has more than tripled. If policymakers want to help lower housing costs, they must reduce the imbalance between population growth and housing starts.

For the federal government, that means aligning immigration targets more closely to housing supply and rethinking policies that increase housing demand, such as homebuyer tax credits and First Home Savings Accounts. Meanwhile, provincial and local governments should reduce red tape and construction costs to increase supply.

The Carney government has its work cut out for it. Besides U.S. tariffs, Canadians face several critical issues that persisted long before Trump was re-elected and will continue unless something changes.

Jake Fuss and Grady Munro are fiscal policy analysts at the Fraser Institute