The Liberal government recently announced new income support measures, including an extension of the CERB program until September and easing EI eligibility criteria through 2021.
The package, estimated to cost $37 billion, is important — providing much-needed relief to those affected by the COVID-19 pandemic — but to reignite the damaged Canadian economy, it can only get us so far.
Canada’s unemployment rate is still extremely high. According to Statistics Canada, it stands at 10.9 per cent, down somewhat from May’s record high of 13.7 per cent.
Despite this small decline, almost 2.2 million Canadians were unemployed in July, nearly twice as many as in February. Clearly, the country needs jobs, and for jobs, real investments are required.
This comes at a time when another front is in urgent need of action — the fight against climate change.
Since first elected, Trudeau’s government has often spoken about the need to invest in Canada’s transition to a zero-carbon economy, but no meaningful action has been taken.
Even the assignment of a special “green recovery task force” didn’t result in any concrete action for emerging from the pandemic through sustainable investments.
Canada’s actions are disappointing when compared to other countries. Since the beginning of the COVID-19 crisis, France and Germany, for example, have committed $36.7 and $27.1 billion (U.S.) respectively in funding for clean energy projects. Democratic candidate Joe Biden also revealed a $2-trillion (U.S.) climate plan over four years.
At the same time, Canada has committed only $2.4 billion (U.S.) for clean initiatives.
But it seems that finally, five years after Trudeau came to power, the stars are aligned for his government to make bold investments in the spirit of a Green New Deal that would tackle both crises at the same time.
Helping it first is the current composition of the government. Bill Morneau, who clashed with Trudeau over the scope and scale of proposed green initiatives, is now out of the way.
Chrystia Freeland, the newly appointed finance minister, seems on board, telling reporters just a few days ago: “All Canadians understand that the restart of our economy needs to be green. It also needs to be equitable and inclusive.”
And behind the scenes, it is going to be climate-champion Mark Carney, who was hired as an informal adviser to the prime minister. The former central bank governor will provide economic expertise through a climate-change prism.
The second piece of the puzzle is the fact that Canada can take advantage of historically low borrowing rates to finance its Green New Deal investments.
Sure, the deficit it’s running is massive, and will have to be dealt with in future years. But real investments are an absolute must to get people back to work, and we can take comfort in the fact that the country can borrow money almost for free.
For example, Canada can now issue 30-year government bonds and pay its debt-holders just over 1 per cent in annual interest.
In fact, Canada can lock in historically low borrowing rates for a period as long as 50 years. It already once before (in 2014) issued ultralong bonds (maturing in 2046), which at current prices pay only 1.03 per cent in annual interest.
With the cabinet on board and cheap financing readily available, what kind of investments should the government pursue as part of its green recovery plan?
One such project could be introducing a high-speed rail between Toronto and Montreal. A few months ago, I argued on these pages that such a service is a great idea not only environmentally but also financially.
A Toronto-Montreal connection (potentially linking Ottawa) would hit the “sweet spot” of city-to-city high-speed routes that can be operationally profitable.
Hence, a project like this has all the desirable features that the government is seeking. It will create thousands of jobs and support Canadian companies; it is green by definition; it is a long-term investment that has many positive externalities; and it can be financed cheaply. What’s not to like?
For additional ideas the government may consult the Task Force for a Resilient Recovery, an independent group of Canadian finance, policy and sustainability leaders who recently published a preliminary report with suggestions for $50 billion of green investments mostly in the areas of climate-resilient and energy-efficient buildings, zero-emission vehicles and renewable energy.
The upcoming speech from the throne is scheduled for September 23. Let’s hope that it will include a commitment to build a Toronto-Ottawa-Montreal high-speed rail as part of a radical green plan.
Trudeau’s government must deliver on its promise to transition Canada to a zero-carbon future, making sure this transition is inclusive and equitable, to use Freeland’s words.
Financed at 1 per cent for 50 years? Now that’s also a bargain.
Is gold better than bonds for long-term investment? – The Financial Express
Gold for most Indians is not just an investment instrument but more of an emotional investment. Higher liquidity and sentimental attachment towards the precious metal make it part of just about everyone’s portfolio.
Add to it the current uncertainties of the Covid pandemic and economic hardships; gold has witnessed more investment as an insurance against the uncertainty leading to soaring price points.
But is gold better than bonds, which have similar risk-return characteristics? Let’s find out.
There is no denying the fact that gold remains a fundamentally strong asset class. But it is not that it offers enormous returns in the long term. In fact, gold has historically offered a return of about 8.87% over the last 10 years.
Now this may well be below high-risky equity returns, the returns are still quite comparable to bonds which have offered an estimated 8.81% returns for the same period.
When markets are sluggish or uncertain, gold prices often rally strongly but the inverse means gold prices can also be flat for years. Government bonds, on the other hand, offer secured investment with benefits like cash flow, dividends, and interest income.
Safety and risk
Investment in physical gold was traditionally risky owing to storage concerns. Now, with Gold ETFs and Sovereign Gold Bonds (SGBs) available, safety and storage risks are almost at par with government bonds.
While gold is universally accepted as a hedge against inflation, physical gold in the form of jewelry still carries the risk of impurity and lower resale value. Government bonds, on the other hand, have no such limitations.
The cost of minimum investment is higher in physical gold, Gold ETFs, and SGBs as compared to government bonds. This makes government bonds more suited for a large number of investors.
For example, to invest in gold ETF or SGB, one will be required to purchase minimum 1 gram of gold (approximately Rs 5,000). Comparatively, an investment in the newly introduced floating rate savings bonds can be made with as little as Rs 1,000.
Capital gains taxation (LTCG)
Long Term Capital Gains (LTCG) tax is applicable for gold investment, be it physical gold or Gold ETFs. LTCG tax is applicable after 3 years for both physical gold and Gold ETFs. In SGBs, the capital gains tax is not levied only if investment is kept till maturity date.
In case of bonds, LTCG tax can be exempted if investment is made in certain specified government bonds. For example, one can claim capital gains tax exemption under Section 54EC if investment is done in bonds of National Highways Authority of India or Rural Electrification Corporation Limited.
Depending on the investment made in the bond scheme, TDS is usually applicable on the Interest Income. However, eligible investors have the option to submit Form 15G/H, making it suitable for older investors. TDS, however, is not applicable on interest for investments made under SGBs.
An investment for the long term may require change of plans and option of premature withdrawal should be a consideration. With physical gold and Gold ETFs, there is no lock-in period for investment. SGBs, on the other hand, come with a minimum 5-year lock-in period.
Government bonds may or may not offer premature withdrawal option and sometimes reserve it only for senior citizens and not all investors. For example, RBI’s newly-launched floating rate savings bonds scheme offers no premature withdrawal for those below 60 years of age.
For the young, investment in physical gold or Gold ETFs may, therefore, be a more lucrative option compared to government bonds having limits on premature withdrawals.
Eventually, there is no one winner in the gold versus bonds face-off. Invest depending on your time horizon and financial needs, after factoring in the characteristics of both products.
(By Nisary M, Founder, Hermoneytalks.com)
Why Canada Continues to Attract Real Estate Investors
Real estate experts, foreign investors, and Canada’s citizens unanimously agree that Canada has everything it takes to create better living opportunities and, therefore, become one of the most sought-after destinations globally. Besides, real estate in Canada is competitively priced, vast, and has a reasonable appreciation rate. The hassle-free legal system in Canada is another reason why foreign investors flock to Canada. A comparative study of real estate in the UK, US, Spain, or France will help you realize that Canadian real estate is not very expensive. You will find cheaper land in Canada and a myriad of real estate options to invest in.
As the Canadian economy strengthens, more people are expected to migrate to this country, leading to a rise in demand for properties. According to real estate experts, this growing demand will boost the property values radically in years to come. In contrast to the high standard of living, Canada’s cost is lower than in many other countries. In Canada, foreign investors can buy cold properties that they probably couldn’t have afforded in their own countries. The most significant advantage is that you don’t have to be a resident of Canada to purchase property in the country. This puts foreign investors in an enviable position to invest in a higher quality purchase in Canada than their homelands. Owing to the abundant land available, overcrowding will never be an issue in this incredibly beautiful country. Besides, Canada has a diverse property portfolio that can please even the most fastidious buyer.
The best part of being a foreign investor is that you virtually get to enjoy almost all the privileges and benefits as any other citizen and yet, not go through the painful ordeal of applying for immigration acceptance. Thus, as a foreign investor, you can open a bank account in the country and have your land and car. Alternatively, you can make Canada your new home by permanently settling in this country like millions of Europeans who have already decided here. This explains why Canada is the third most popular emigration destination. The ever-increasing popularity of Canada will continue to attract more people in the future. This popularity of Canada among expatriates ensures a steady supply of money in the property market.
A quick look at the figures mentioned below will throw light on the Canadian property market’s past performance. Listed below are the rising prices of a single-family home in Vancouver:
- 1961 – CAD $13,500
- 1974 – CAD $48,000
- 1982 – CAD $120,000
- 2007 – CAD $475,000
Canada provides excellent rental opportunities for real estate investors. Thus, if you purchase apartments and townhouses in some of the hottest areas in Canada, you can enjoy a steady income and cash flow in the form of rent. This allows you to enjoy capital appreciation and build equity in the long run. No matter what the reason may be for your investment, Canada has an effortless buying procedure, and you can close a property deal in a short time.
Rogers sweetens offer for Cogeco with $3B Quebec investment pledge – BNN
Rogers Communications Inc. said Friday it will invest up to $3 billion in Quebec if the telecom giant is successful in acquiring rival Cogeco’s Canadian assets.
The Toronto-based company unveiled a series of measures aimed at sweetening a deal to buy Cogeco’s internet and cable television business after getting rebuffed by the company’s largest shareholder earlier this month.
Rogers and Altice USA Inc. delivered an unsolicited proposal to buy Cogeco, with the U.S. company offering $10.3 billion for the company and would then sell the Canadian assets to Rogers for a cash consideration of $3.4 billion.
“Rogers is deeply committed to the future of innovation and the knowledge economy in Quebec. We would be honoured to help enhance the customer experience and bring new investments including 5G that will fundamentally reshape the economic landscape of Quebec,” said Joe Natale, Rogers’ president and chief executive officer, in a statement.
Rogers said it would spend $3 billion in Quebec, where Cogeco is based, over the next five years. Half of that investment would be earmarked for various network investments including a broad rollout of 5G wireless technology infrastructure as well as expanding connectivity to rural communities. Rogers added it would ensure that the combined company would employ 5,000 people while keeping Cogeco’s headquarters and management in the province, and would support several community partnerships.
A Cogeco spokesperson told BNN Bloomberg in an email that Rogers is free to make its investment in Quebec, but it doesn’t need to buy Cogeco to do so.
“If Rogers fails to invest, their competitors will take away its mobile customers, regardless of 5G,” the spokesperson said. “As far as Cogeco is concerned, the company remains focused on executing its profitable growth strategy, investing in its state of the art broadband networks and offering leading edge services to its customers.”
Earlier this month, Cogeco’s independent directors rejected Rogers and Altice’s takeover offer, with Gestion Audem, Cogeco’s controlling shareholder and the Audet family’s investment vehicle, stating that it is not interested in selling its shares.
Analysts have also cast doubt on whether a deal could ever materialize given the Audet family’s control of the business.
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