Government stimulus had little impact on economy: Fraser Institute

Claims by the government about the impact of its nearly $47.2 billion in stimulus spending are overblown, having had a "negligeable" effect on GDP growth, according to a recent study by the Fraser Institute, a British Columbia-based think tank.

Using calculations based on Statistics Canada figures, the study points to net exports and private sector business investment as being the real drivers of growth. Government consumption and investment accounted for 0.1 per cent of the 1.1 improvement in economic growth between the second and third quarters of 2009, while contributing nothing to the one per cent improvement between the third and fourth quarters, said the study.

The report also draws upon a recent report by the Parliamentary Budget Office, suggesting that much of the actual stimulus funding on infrastructure will be spent through the 2010-2011 fiscal year. With the majority of money being spent as the economy naturally begins to grow, study authors said that, "as a result, the government will be competing with the private sector for resources, which will result in increased costs and fewer private sector projects."