A lot has happened, to say the least, since Quebec’s last budget. A year later, the province is already well into “a new economy,” a phrase repeated several times in this year’s budget, unveiled Thursday by Finance Minister Éric Girard.
A new economy can be a bad and a good thing, depending on what exactly you mean by it.
“I used to have a boss who would say ‘each crisis is an opportunity,’” Girard said Thursday in response to a reporter’s question.
The province has made strides in areas like telemedicine and bolstering senior care, he said, and it will continue some of those transformations.
However, despite those sunny tones, Quebec’s new economy is also gloomier than last year’s. After hitting nearly 18 per cent unemployment in 2020, it has projected deficits for the next six years, requiring it to suspend a law requiring budgets to be balanced within five years.
It’s the first time in seven years Quebec hasn’t balanced the budget. Girard estimated that COVID-19 will end up costing Quebec a total of $30 billion.
While the province expects the economy to bounce back in 2022, with full employment by the end of that year, this is still “a pandemic budget,” he said bluntly.
“We’re in a pandemic; we’re in the worst recession since World War II,” he said.
The budget is full of fix-it measures meant to help repair some of the damage, including help to students and a tax break for businesses, as well as other spending meant to stimulate, including infrastructure projects.
Where the money will all come from is somewhat uncertain—the government has, as it promised earlier this week, not raised taxes.
Instead, its estimates rest largely on the economy bouncing back. It also has a new plan to collect taxes on foreign goods sitting in Quebec warehouses, and a much bigger wish for increased federal health transfers.
But these measures both depend on Ottawa’s decisions, and there’s little sign Ottawa will agree to the health transfer bump.
THE NEW HEALTH CARE
On top of the massive spending of the last year, Quebec health care is set for another mammoth boost of cash: $10.3 billion over five years.
Much of that will go towards improving care for seniors in a more permanent way.
This was needed anyway, the province noted in its budget documents—COVID-19 just highlighted it. By 2030, a quarter of Quebec’s population will be over 65.
Spending in this area includes:
- $2.2 billion to hire more orderlies and nurses for public care homes
- $534 million to hire a manager for each public long-term care home
- $750 million over four years to increase public home-support services
- A major renovation effort for private seniors’ residences
- An extra $95 million over four years for informal caregivers
Overall health-care staffing is also getting a lot of attention, with the province trying to retain its workers.
That includes the thousands of new orderlies trained during the pandemic, in three big cohorts, who were promised bonuses and will now see them gradually reduced, rather than suddenly cut off.
- $1.8 billion to pay 10,000 new orderlies
- $1.2 billion to convert the part-time orderlies to full-time
Quebec is also spending half a billion to improve access to front-line services, including “accelerating the digital shift,” and $288 million on mental health services.
CASH BREAKS, AND ACADEMIC HELP, FOR STUDENTS
Post-secondary students will get a break on their loans, getting one year interest-free, as well as a gift of $100 per semester for the current year.
It’s part of another massive spending plan of $1.5 billion for education to allow “every young person [to] reach his or her potential,” said Girard.
Enticing students to hit the books again isn’t just about fixing the damage of the last year, but about Quebec’s bigger hopes pinned to the economic recovery, Girard said.
“Education is part of increasing the economic potential of Quebec, and it’s very important,” he said.
There is also spending for younger students:
- $170 million for tutoring
- $125 to increase access to sports
- $93 million on special needs classes
- $80 million on school infrastructure
BUSINESSES AND WORKERS, INCLUDING THOSE OUT OF WORK
Quebec’s business sectors have all shifted, and for some of them the shifts will be permanent.
“Telework is here to stay,” said Treasury Board President Sonia LeBel on Thursday, adding that this will open “new horizons,” including the ability to spread work over a bigger variety of regions.
The province is putting $1.3 billion into high-speed internet, part of the provincial-federal program announced earlier this week, and part of its 2018 campaign platform.
Another half a billion is going into economic development across the regions.
There have been many less promising changes, too, including a mass movement of people dropping out of the workforce. The province will need to step in to reverse this, said Girard.
Overall, $404 million is going towards the effort, including an injection of $246 million to integrate immigrants into the workforce.
Some of the biggest news for the owners of small- and medium-sized businesses, however, came in the form of an old-fashioned tax break: their tax rate will drop from 4 per cent to 3.2 per cent for their first half-million in annual income, bringing the rate in line with Ontario’s.
Other sectors are also getting a boost:
- $200 million to help “innovative” businesses including battery-makers and cybersecurity firms
- More traditional industries, including restaurants are getting nearly the same amount over the next two years in aid.
WHERE’S THE MONEY COMING FROM?
Girard said earlier this week that he wouldn’t hike taxes, and he stuck to that plan—at least when it comes to Canadians.
But the province has another plan up its sleeve, to collect sales tax from foreign goods supplied through “fulfillment warehouses,” it explained.
In other words, companies like Amazon that store goods in Canada will be charged Quebec sales tax on the final purchases of products, as opposed to import taxes.
This would raise $1.8 billion of revenue over the next five years, the province said.
The program, however, is a federal one and relies on Ottawa to push it through. It was first announced in fall 2020 and it’s still unclear when it might come to pass.
The province is hoping for a much bigger lifeline from Ottawa in the form of increased federal health transfers, which would add up to $6 billion per year at the level Quebec proposes: 35 per cent of expenditures, up from 22 per cent.
However, the federal government won’t table its budget until April 19, and there’s no real indication it plans to make this wish come true.
Unlike Ontario, which also tabled its budget this week, Quebec even wrote that possibility into its budget plan, though Girard was careful to point out to reporters that he doesn’t have a line item for it.
“There’s no number attached to federal transfers,” Girard said. “There’s a request.”
Overall, many “elements will be pertinent” in deciding how much revenue Quebec can bring in, including how fast the economy gets back to speed, he said.
“It will depend. If the economy is stronger, if it [catches up], we’ll have less need of the other elements.”
NOTABLE QUESTIONS: DOMESTIC VIOLENCE, AFFORDABLE HOUSING
Girard and LeBel faced several questions over funding to stop the spate of domestic violence Quebec has recently seen, including seven murders of women in the last seven weeks.
Thursday’s budget included only $22.5 million over five years to add shelter space for women facing violence at home.
The move drew criticism from some opposition politicians, including Manon Massé, a co-leader of Quebec Solidaire.
“We’re talking half the population,” she said. “If the government [can] put a billion dollars to connect to the internet, I’m sure it could have put more than that for women.”
Facing questioning by reporters, Girard said several times that more cash may be provided if needed.
“Listen, it’s a situation that’s extremely serious,” he said. “And if there are more sums necessary, we’ll allocate them.”
Social housing also got some money: $408 million, meant to fund 5,500 new units. However, some of it was already earmarked, and the new amount is $250 million.
Quebec’s major cities have said the need is much greater. In Montreal alone, the municipal government plans to build 12,000 units over the course of its mandate, and the city has 150,000 households waiting for affordable housing.
TSX extends gains as gold prices rise, set to rise for third week
(Reuters) -Canada’s main stock index extended its rise on Friday after hitting a record high a day earlier as gold prices advanced, and was set to gain for a third straight week.
* At 9:40 a.m. ET (13:38 GMT), the Toronto Stock Exchange‘s S&P/TSX composite index was up 24.24 points, or 0.1%, at 19,326.16.
* The Canadian economy is likely to grow at a slower pace in this quarter and the next than previously expected, but tighter lockdown restrictions from another wave of coronavirus were unlikely to derail the economic recovery, a Reuters poll showed.
* The energy sector climbed 0.6% even as U.S. crude prices slipped 0.1% a barrel. Brent crude added 0.1%. [O/R]
* The materials sector, which includes precious and base metals miners and fertilizer companies, added 0.3% as gold futures rose 0.7% to $1,777.9 an ounce. [GOL/] [MET/L]
* The financials sector gained 0.2%. The industrials sector rose 0.1%.
* On the TSX, 117 issues advanced, while 102 issues declined in a 1.15-to-1 ratio favoring gainers, with 14.26 million shares traded.
* The largest percentage gainers on the TSX were Cascades Inc, which jumped 4.2%, and Ballard Power Systems, which rose 2.9%.
* Lghtspeed POS fell 5.6%, the most on the TSX, while the second biggest decliner was goeasy, down 4.9%.
* The most heavily traded shares by volume were Zenabis Global Inc, Bombardier and Royal Bank of Canada.
* The TSX posted 23 new 52-week highs and no new low.
* Across Canadian issues, there were 160 new 52-week highs and 12 new lows, with total volume of 29.68 million shares.
(Reporting by Shashank Nayar in Bengaluru;Editing by Vinay Dwivedi)
Canadian economy likely to slow, but COVID-19 threat to growth low
By Indradip Ghosh and Mumal Rathore
BENGALURU (Reuters) – The Canadian economy is likely to grow at a slower pace this quarter and next than previously expected, but tighter lockdown restrictions from another wave of coronavirus were unlikely to derail the economic recovery, a Reuters poll showed.
Restrictions have been renewed in some provinces as they struggle with a rapid spread of the virus, which has already infected over 1 million people in the country.
After an expected 5.6% growth in the first quarter, the economy was forecast to expand 3.6% this quarter, a sharp downgrade from 6.7% predicted in January.
It was then forecast to grow 6.0% in the third quarter and 5.5% in the fourth, compared with 6.8% and 5.0% forecast previously.
But over three-quarters of economists, or 16 of 21, in response to an additional question said tighter curbs from another COVID-19 wave were unlikely to derail the economic recovery, including one respondent who said “very unlikely”.
“Canada is undergoing a third wave of the virus and while case loads are accelerating, the resiliency the economy has shown in the face of the second wave suggests it can ride out the third wave as well, without considerable economic consequences,” said Sri Thanabalasingam, senior economist at TD Economics.
The April 12-16 poll of 40 economists forecast the commodity-driven economy would grow on average 5.8% this year, the fastest pace of annual expansion in 13 years and the highest prediction since polling began in April 2019.
For next year, the consensus was upgraded to 4.0% from 3.6% growth predicted in January.
What is likely to help is the promise of a fiscal package by Prime Minister Justin Trudeau late last year, which the Canadian government was expected to outline, at least partly, in its first federal budget in two years, on April 19.
When asked what impact that would have, over half, or 11 of 20 economists, said it would boost the economy significantly. Eight respondents said it would have little impact and one said it would have an adverse impact.
“The economic impact of the federal government’s promised C$100 billion fiscal stimulus will depend most importantly on its make up,” said Tony Stillo, director of Canada economics at Oxford Economics.
“A stimulus package that enhances the economy’s potential could provide a material boost to growth without stoking price pressures.”
All but two of 17 economists expected the Bank of Canada to announce a taper to the amount of its weekly bond purchases at its April 21 meeting. The consensus showed interest rates left unchanged at 0.25% until 2023 at least.
“The BoC is set to cut the pace of its asset purchases next week,” noted Stephen Brown, senior Canada economist at Capital Economics.
“While it will also upgrade its GDP forecasts, we expect it to make an offsetting change to its estimate of the economy’s potential, implying the Bank will not materially alter its assessment of when interest rates need to rise.”
(Reporting and polling by Indradip Ghosh and Mumal Rathore; editing by Rahul Karunakar, Larry King)
CANADA STOCKS – TSX rises 0.78% to 19,321.92
* The Toronto Stock Exchange‘s TSX rises 0.78 percent to 19,321.92
* Leading the index were Martinrea International Inc <MRE.TO>, up 7.4%, Fortuna Silver Mines Inc, up 7.1%, and Hudbay Minerals Inc, higher by 6.7%.
* Lagging shares were AcuityAds Holdings Inc, down 6.7%, Ballard Power Systems Inc, down 6.5%, and Northland Power Inc, lower by 6.0%.
* On the TSX 165 issues rose and 60 fell as a 2.8-to-1 ratio favored advancers. There were 18 new highs and no new lows, with total volume of 203.0 million shares.
* The most heavily traded shares by volume were Royal Bank Of Canada, Suncor Energy Inc and Air Canada.
* The TSX’s energy group fell 0.59 points, or 0.5%, while the financials sector climbed 0.86 points, or 0.3%.
* West Texas Intermediate crude futures rose 0.27%, or $0.17, to $63.32 a barrel. Brent crude rose 0.36%, or $0.24, to $66.82 [O/R]
* The TSX is up 10.8% for the year.