From Export-Led to Consumption-Led Growth: The Evolution of the Canadian Growth Model Since the 1980s

The objective of this article is to leverage analytical insights from the growth model perspective to explore the evolution of Canada’s growth pattern from the 1980s to the late 2010s. The paper makes four empirically informed observations. First, although Canada’s growth prospects initially appeared to be closely tied to exports, its economy pivoted to consumption-led growth in the 2000s, where it stayed in the 2010s. Second, lawmakers facilitated housing financialization as a way to bolster domestic consumption until the global financial crisis of 2007–08. Third, although the financial crisis did not wreak havoc on the Canadian economy, policymakers responded prudently by moderating financialization in the housing market. Finally, rising income inequality, slower real wage growth, and higher housing-related expenses contributed to debt accumulation among lower-income households and to the slower growth of household consumption in the 2010s.