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Trudeau set to secure third term, but without coveted majority

Theophilos Argitis, Bloomberg News on

Published in News & Features

OTTAWA, Canada — Prime Minister Justin Trudeau is poised to win a third term in a snap election but fall short of regaining the parliamentary majority he had been seeking.

CTV News projected his governing Liberal Party will win a plurality of seats, and form a minority government. CBC News also projected a Liberal government, without making a call on whether the party will have enough seats for a majority in parliament.

The projected result would leave Trudeau in power to pursue the most left-leaning agenda the country has seen in at least a generation. Even with a minority, the early results suggest the Liberals will have a stable government, which will allow Trudeau to continue with a big-spending agenda that is largely backed by his government’s most likely partner, the left-leaning New Democratic Party. Both parties also have campaigned — to various degrees — on higher taxes for businesses and stricter emission rules for the oil and gas sector.

Trudeau’s Liberal Party was elected or leading in 150 of the 338 seats in the House of Commons, ahead of the 119 seats for the Conservatives under Erin O’Toole, according to results from Elections Canada. There were no numbers from 3 seats as of 10:36 p.m. Ottawa time. A party needs 170 seats to form a majority in the House of Commons.

The victory is a historic milestone for Trudeau, marking only the eighth time a Canadian leader has won three successive elections. Trudeau’s father, Pierre, also did it. It also represents a comeback of sorts for Trudeau, whose party was trailing in the polls midway through the five-week campaign.

Still, failure to secure a majority is a disappointing result for the Liberals, the second time voters have denied this prime minister full control of the legislature — limiting his freedom to take big risks or govern unilaterally.

Minority governments have become familiar political terrain in Canada, and popular given they maximize participation of a number of parties in the process of lawmaking. The previous six elections produced four minority governments, lasting on average about two years.

But there’s a downside. Minority parliaments keep parties on constant campaign footing and give them less scope to consider long-term issues. In practice, that means politicians are wary of tackling big problems like Canada’s sagging competitiveness or slow transition toward a low-carbon economy.

 

There’s also an incentive to spend more, to accommodate priorities of other parties.

In the two years since Trudeau lost his majority in 2019, the Canadian currency has been the second-worst performer among G-10 currencies against the U.S. dollar. The country’s benchmark S&P/TSX Composite Index is up 25%, barely half the gain of the S&P 500.

A stable minority is one in which the government has multiple potential partners to pass legislation, giving the prime minister maximum leverage. Trudeau largely had control over the economic agenda before calling the Sept. 20 vote, with all three opposition parties at one point backing his emergency borrowing to deal with COVID-19.

The Liberals passed a budget with C$140 billion ($110 billion) in new spending measures in April with the support from the New Democratic Party. Even the Conservatives largely supported the Liberal government’s pandemic support measures through much of last year.

The convergence on policy that lawmakers displayed in the last parliament spilled over into the campaign, with all parties promising more social spending and continued deficits to help the recovery. The Liberals, Conservatives and NDP “are relatively aligned on most issues so we aren’t flagging big concerns on policy difference,” Rebekah Young, economist at Bank of Nova Scotia, said by phone.

Still, the outcome does matter for investors. Trudeau has pledged to increase taxes for the country’s biggest banks and impose stricter emissions rules for the oil and gas sector — the two largest sectors by weighting in the benchmark TSX stock index. He would win support from the NDP on those issues.

O’Toole has pledged some tax credits on investment and is generally seen as more friendly to the energy sector. The Conservatives are also seen as more credible, at least by market players, on fiscal issues.

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