Dawn: Dawn, thank you so much for having us. How are you doing?

Guest: I'm good. How are you?

Guest: I want to start with a chart of Canadian economic growth. Over the past year, GDP contracted 1.8% in the second quarter, then bounced back. It was up 2.6% in quarter three. That's the last period for which we have data. But the forecast are positive for Q4 and right through the year. Can you tell us what are the main drivers of this? We'll call them modest expansion.

Guest: Well, in the near term, I think it's more a question of what's not really driving us, and that will be the consumer. The demographics for Canada have changed significantly over the last couple of years. And so when we think about what's happening in 2026, we're going to see an economy which isn't getting that talk, if you will, from that population growth. And so we think that in the near term anyway, it's probably going to be a situation where you have weak consumption activity, housing market activity. It's a bit mixed depending where you live. And so that two on net will be a bit of a positive. But again, not super quick. I think one of the big issues that we're confronting as we go through, at least the first part of our forecast, is what's happening on the business front. I mean, businesses are extraordinarily uncertain, and it makes sense because of what's happening in the global economy. So we haven't seen any business investment. And that's certainly played out in 2025. And we think in the early part of 2026, that's still going to be the case.

Host: All right. With that being said, as you mentioned, net overall, we expect in 2026 a growth rate of 1.5%. Is that an optimistic number or pessimistic one, considering the challenges that you sort of laid out?

Guest: Well, I think when we look at that number, it doesn't look all that hot for the year. But I think we're looking at it as a year in two halves, meaning first half probably going to be feeling sluggish and soft. But as we round out 2026, we think there's lots of reasons to believe we're going to see stronger activity. First of all, interest rates we believe will remain low at 2.25%. That's much lower than the 5% of where we saw in mid 2024. So that will be good. And it's going to help consumers and it's going to help consumers, because we still have a lot of mortgages that are going to refinance this year. In 2021, when people took those mortgages, the rates were really low. Now it's not as low, but it certainly is a lot lower than what we saw when we had those high interest rates. So that's going to provide some relief. And remember, we've had lots of employment growth over the past few years. We've had lots of wage growth. So that's going to help those consumers navigate through this period. The other and I hope this isn't a hopeful prediction, but we do have the Kuzma review excuse me in July. And there what we're consuming. And again this is a pretty big assumption for our forecast is that we will retain our access to the US market basically tariff free. Now it doesn't necessarily imply that lumber, steel, and aluminium finished autos may not see a lot of change there. So we baked that in. Not a lot of change. That means that those parts of the economy will remain pretty weak. But the other parts of the economy where we can actually export to the United States tariff free, and that can be up to 90, 95% of our exports. Those are really going to be areas where conceivably we might even have an advantage, because they're lower rate than other countries.

Host: All right. With that being said, as you mentioned, net overall, we expect in 2026 a growth rate of 1.5%. Is that an optimistic number or pessimistic one, considering the challenges that you sort of laid out?

Guest: Yeah, 2025, some of it because we did see a significant increase in the defence side, mainly through wages and salaries. So that did give a bit of a lift. And as we go through the course of this year, you know, we're going to continue to see some spending now. Is it going to be an enormous lift. Probably not because all of these are big ticket items and it takes a while for that money to flow through. But having said that, on the margin definitely going to be the case. We think that the investment side of government spending, not so much the consumption side, because we know there's going to be a lot of cuts to government workforce, for example. So we say that we will get a lift in 2026 from the government investment side. The other thing I guess I'd say is we're going to have a lot of other changes in policy that we think will be helpful for businesses who are looking to invest.

Host: Like what?

Guest: Well, we're going to see and I mean, again, this is what our assumptions are elimination or at least a reduction in inter-provincial trade barriers. So that opens up for a lot of companies across the country, which is really quite amazing. We also think we're going to see some reduction in some of the regulation. You know, when we look at companies who are starting to invest, they're looking at big delays, lots of regulations, lots of red tape. Well, to the extent that we have a commitment from governments that they will reduce this, we think that's going to alleviate some pressure from the business side as well. So while it's not direct government spending per se, the alleviation of some of these, these real impediments, I think that's going to be good for the business side.