Canada’s largest lenders are warning Prime Minister Justin Trudeau’s government it doesn’t have carte blanche to run massive budget deficits, even though there’s some room for additional spending in the next couple of years.
Finance Minister Chrystia Freeland held a call with chief executives from the nation’s biggest banks last week to discuss the economic outlook and potential policy steps. She was told that while low interest rates provide some scope to borrow more in coming years to support the recovery, it’s imperative the government recommit to specific new debt targets to impose discipline on the budgeting process, according to one person familiar with the discussion.
Recent polls by the Pew Research Center show that 88% of Canadians think our governments have done a “good job” with the COVID-19 crisis. In part, this may be because the Canadian government recognized early on that one of the real danger points in the pandemic was a possible loss of consumer confidence. If people believed they were going to be in financial trouble, they would stop spending, start hoarding, and leave their dollars in the banks – all of which could trigger a broader collapse of the economy.
Thinking about Niagara’s Opportunities in a Post-Brexit World Remember Brexit? In the midst of a global pandemic, a related economic slump, the WE charity scandal and the usual Trump-related political insanity south of the border, one can be forgiven for overlooking yet another international crisis that has dropped from the headlines. As 2020 rolls along […]
In the COVID-19 recovery phase, natural resources are well-positioned to step in to assume their traditional leadership role in creating wealth and jobs for Canadians, writes economist Philip Cross.
Canadian communities are now about two months into the COVID-19 crisis, and the passage of time has started to give us some insights into the pandemic’s impact on the economy – and what we can do to prepare for economic recovery. I’ve been running a series of online workshops for communities with the Economic Developers Association of Canada (EDAC), and this article – the final piece in a three-part series for The Niagara Independent – draws on materials from sessions I ran for about 125 communities in April and May.
To absolutely no one’s surprise the Consumer Price Index for April – more commonly know as the inflation rate – dropped into negative territory in Canada for the first time in more than a decade.
The last time the CPI was in the red was September 2009 as a result of the sub-prime mortgage crisis.
Part One: Reaction
Canadian communities are now about two months into the COVID-19 crisis, and the passage of time has started to give us some insights into the pandemic’s impact on the economy – and what we can do to prepare for economic recovery. I’ve been running a series of online workshops for communities across Canada, and this article – the first in a series of three over the next three issues of The Niagara Independent – draws on materials from a session I ran for 103 communities on April 30th.
To pay for COVID-19 programs like the Canada Emergency Response Benefit (CERB), federal and provincial governments are expected to borrow 12 per cent of the country’s income, adding to a public debt of more than $770 billion.
Now that the minds of policy makers and others begin to turn to how our economy will operate after the COVID-19 crisis has passed, one issue arising is how will Canada’s relationship change with its major trading partners. In any given year, Canadian exports and imports each represent about one-third of our Gross Domestic Product, so any change in our international trading arrangements is a big deal. Over the last couple of decades, Canada has also signed several substantial trade agreements, further broadening our economic involvement with other countries. The economies of all Canadian provinces are significantly dependent on trade, with Ontario and Alberta being particularly vulnerable to trade disruption.
The difference between economics and economic development is like the difference between science and engineering … scientists might know the theory, but you wouldn’t want them to build a bridge. The reason we trust engineers to build bridges is because they’ve actually had to build them many times before, learning and verifying what works each time they do. Engineering is “applied” science, based on the insights and skills built by generations of doers and builders. In that sense, economic development is applied economics, and it builds on the insights and experiences of generations of street-level practitioners working to strengthen local economies.
While we all hunker down and wait out the Covid19 health and economic crisis – and dearly hope we see some light at the end of the tunnel sooner than later – there will also be opportunities to consider once the worst has passed and we move into recovery mode. One longstanding inequity that has become even more glaringly obvious during this crisis is the large and growing gap between the compensation and benefits of the vast majority of public sector workers and the private sector taxpayers who pay for them.
When Ontario Finance Minister Rod Phillips stood in Queen’s Park on Wednesday to deliver an economic update in place of the 2020 budget he had one job – make sure the cure for COVID-19 isn’t worse than the pandemic itself.
By cure I mean the response from an economic standpoint, not the actual vaccination health care professionals and scientists around the world are working on right now.
Recent events demonstrate that Canada must urgently find common ground on how to balance climate policy with a commitment to support economic growth. Canadian businesses understand the serious need to address climate change and we urge you to use the upcoming federal budget as an opportunity to find a balance with our economic development.
The role of business is greater than just creating and providing the goods and services that people use. Business matters for other reasons: We invent. We innovate. We invest. We build wealth and, yes, we create the jobs that allow us to provide for ourselves and our families. We contribute to building strong communities and to addressing social problems, including climate change.
Last month, the number of those infected with novel coronavirus, Covid-19, was around 1,000. That number is now over 80,000, with over 2,700 dead — much worse than SARS. And these are only the confirmed cases; Professor Neil Ferguson, an infectious diseases expert at Imperial College, London, suggests that there are hundreds of thousands of undetected cases. Both Ferguson and Harvard’s Marc Lipsitch, another virus researcher, claim that Covid-19 will infect 40 to 60 percent of the world’s population if left uncontrolled.
In response to this threat, the Canadian government continues to sit on its hands, and refuses to consider travel bans or meaningful quarantine measures. This is nothing new.
As of Jan. 1, every Canadian and all Canadian businesses are paying a price on carbon. The federal Greenhouse Gas Pollution Pricing Act means provinces that do not have their own price on pollution that meets a federal standard get the federal carbon tax applied to them. That includes Manitoba, whose premier talked Monday about the prospect of replacing the federal charge with a home-grown version. The federal tax is currently $20 a tonne and will rise $10 a year, on April 1 of each year until it hits $50 a tonne in 2022.
For individuals and businesses with relatively small emissions, that carbon levy is applied to liquid and gaseous fuels at the point of purchase. Households receive rebates on their income taxes to offset the cost of the carbon tax. The amount varies by province to account for different uses of fossil fuels.
During last year’s federal election, the Liberals promised a tax cut for the middle class in the form of an increase in the Basic Personal Amount (BPA) – the amount of income that is exempt from personal income taxes. They committed to raising the BPA to $15,000 gradually over the next four years from $12,069 in the 2019 tax year. In dollar terms, this much-vaunted tax cut is pretty miniscule – less than $50 monthly once fully implemented in 2023 – and won’t make a real difference for most Canadians. Those who earn income in the $150,000 range will not be eligible for this bonanza. The impact of this change will mean more Canadians not paying any income tax. There are many other taxes as well – payroll taxes, property taxes, excise taxes, carbon taxes, health taxes etc – but they are often offset by government rebates, tax credits and other measures. Although estimates vary somewhat, it seems that about 40 per cent of Canadians don’t pay any taxes at all, which is not out of whack with comparable data in the US and other developed countries.
Canadians are nervous the nation’s economy is veering toward a recession next year.
In a survey for Bloomberg News by Nanos Research Group, 56% of Canadians said there’s at least a “somewhat likely” chance a recession will hit in 2020 — a sentiment broadly held across regions, gender and age. Only 34% said a recession is unlikely, with 10% unsure.
An Abacus Data poll this past summer ranked “Housing Affordability” as the fifth most important issue for Canadians heading into the Oct. 21 federal vote. The issue of housing affordability was only three per cent less important to those polled as “Climate Change.”
Still, I don’t remember any marches or rallies on home buying during the election. Perhaps that is why the policies the parties presented for those issues left so many Canadians wanting.
Politicians campaign in poetry and govern in prose and this past election season is no different. The campaigning period produced billions of dollars in spending commitments, numerous proposed new benefits, and targeted boutique tax credits. Some of these announcements have been properly costed. Other proposals included somewhat questionable numbers or none at all. As voters, we don’t know how these fiscal plans will pan out.
Federal politicians can be forgiven for giving short shrift to fiscal issues. A recent Ipsos poll shows that only 12% of Canadians identify government deficits/debt as a top ballot-box issue, compared to health care (35%), affordability and cost of living (27%), and climate change (25%).
While many Canadians are focused on the continuing amateur hour going on in Ottawa, where Justin Trudeau was just found yet again in violation of ethics laws, the economic news is getting decidedly grim. And although Trudeau seems to feel he is not bound by the same laws that apply to the rest of us mere mortals, there are few if any politicians that don’t find themselves ultimately beholden to the immutable laws of economics. Trudeau is no exception, and more’s the pity for Canada.
Many economic indicators have turned south in recent months, with a loss of 25,000 jobs in Canada in July. This was the second consecutive month of job loss. We have also experienced a weakening Canadian dollar, turmoil in stock and bond markets, and slowing growth in key powerhouse economies around the world such as Germany and China. Add the US-China trade war into the mix and all of the uncertainty for businesses and investment that creates, and we have a perfect storm of economic bad news. Recessions tend to come around every decade or so, and as the last recession took place in 2008, the global economy is ripe for a downturn.