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Canada's economy has ‘free money lying on the sidewalk’ and nobody is picking it up – National Post

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On the days the Bank of Canada sets policy, my inbox fills with commentary from various economists and sundry currency analysts.

This week’s commentariat included a new addition. Trevin Stratton, chief economist at the Canadian Chamber of Commerce, expressed dismay over the central bank’s revised outlook, which assumes the economy essentially stalled in the fourth quarter, and foresees only lacklustre growth of 1.6 per cent in 2020.

In a shift, Stephen Poloz, governor of the Bank of Canada, told reporters on Jan. 22 that interest-rate cuts might be necessary to offset deflationary pressures. For now, the central bank thinks the economy will pull out of this current soft patch, but the slope of the recovery will be gradual.

And that’s the problem. The central bank also raised its estimate of the economy’s non-inflationary speed limit to two per cent. The gap between that measure and the 2020 outlook suggests that Canada, despite its all-star potential, is performing like a third-liner.

“We have entered an era of low interest rates and sluggish growth as our economy has not been able to build any sustainable momentum,” said Stratton. “This is why the Canadian business community continues to press the government for a national economic strategy that can address our declining competitiveness.”

The biggest of the Big Business lobbies have upped their games over the past couple of months. In November, the Business Council of Canada, which represents the leaders of the country’s largest companies, released a report on what it thinks it will take to get the economy out of third gear. At the end of this month, the Chamber is hosting an “economic summit” in Toronto that will confront what it describes as “monumental transformation.”

Corporate leaders may have discovered what complacency gets you: nothing. Business was a non-entity in last year’s election campaign, meaning every member of Parliament has a mandate to ignore the concerns of the hiring class if he or she desires.

Another reading of Corporate Canada’s newfound urgency is that its members sense that the economy has drifted badly off course. “One month isn’t a trend,” said Goldy Hyder, head of the Business Council of Canada, when Statistics Canada reported a big drop in hiring in November, “but it’s important nonetheless to get ahead of things starting with having an actual economic plan for growth.”

One month wasn’t a trend; hiring rebounded in December.

Still, as the central bank observed, “job creation has slowed,” albeit at levels that are consistent with full employment. Poloz and his deputies also expressed concern over the trajectory of business investment, consumer confidence, and household spending. The momentum that resulted in the addition of more than one million jobs in Justin Trudeau’s first term as prime minister is petering out.

Bottom line: better-than-sluggish growth in 2020 is going to require stimulus of some kind. The question is, who should provide it?

In the fall, the Bank of Canada nudged finance ministers to do it. The Oct. 30 policy statement said officials would be paying particular attention to “fiscal policy developments.” If that was too ambiguous, Poloz told BNN Bloomberg later that day that $5 billion of fiscal stimulus was as good as a quarter-point cut in interest rates. The implication was that the central bank had been doing most of the work for years and that the time had come for others to help out.

Finance Minister Bill Morneau, for one, appears to have taken the hint. With interest rates already very low, the ability of central banks “to be effective in the face of challenges is different than it was in the last real challenge,” he told Bloomberg Television at the World Economic Forum in Davos, Switzerland, referring to the Great Recession. “That’s a reflection back on people like me,” Morneau added. “The world we’re in today is not the same as when rates were at a higher starting point.”

One of the first things Morneau did after the election was propose a modest income-tax cut worth about $6 billion per year once fully implemented. That sounded like it would take some pressure off the central bank, but rules of the thumb don’t always hold up in the real world. Poloz said the tax reduction probably will have only a modest impact on economic growth.

“It’s a targeted tax cut as opposed to a general fiscal stimulus,” he said.

At the same time, reduced spending in Ontario and Alberta will offset increased federal stimulus. The Bank of Canada said “fiscal tightening” in these provinces might partially explain weaker consumer confidence. Morneau probably also is near his limit, as the Parliamentary Budget Officer predicts he will struggle to keep his promise to shrink debt as a percentage of gross domestic product.

“There is zero net incremental fiscal stimulus in Canada,” said Derek Holt, an economist at Bank of Nova Scotia, which has been calling for lower interest rates since the fall. “The onus is on the BoC to step up to the plate if stimulus is needed.”

It might be possible to revive the economy without spending more money or tempting households to taken on more debt.

In the fall of 2018, the Trudeau government promised to ease the regulatory burden, in part by ordering regulators to take the economy into account when setting new rules. But little has happened since, and it’s not obvious that anyone in Ottawa cares. Ryan Greer, a policy director at the Chamber, said the sight of the federal government getting serious about de-regulation would be a “game-changer” for business investment.

The same goes for inter-provincial trade barriers. The International Monetary Fund estimates the free trade within Canada would increase per capita GDP by almost four per cent, massive stimulus that could be paid for with political capital, rather than more debt.

“That’s a huge number,” Poloz said at an event in Vancouver this month. “That’s free money, lying there on the sidewalk and everybody is refusing to pick it up.”

•Email: kcarmichael@postmedia.com | CarmichaelKevin

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U.S. housing market to remain a bright spot in a weak economy

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By Hari Kishan and Richa Rebello

BENGALURU (Reuters) – U.S. house prices will continue to surge well into next year and beyond, outpacing inflation and the overall economy, a Reuters poll of property analysts found, making it a bright spot against an otherwise gloomy economic backdrop.

In a stark reversal, the U.S. housing market – at the epicenter of the global financial crisis more than a decade ago – was expected to extend a helping hand to an economy severely battered by the coronavirus pandemic.

Buoyed by record-low interest rates and strong pent-up demand from a segment of the workforce largely unaffected by pandemic-induced job cuts, house prices will continue to rise over the next two years, the Sept. 15-29 poll of over 40 analysts showed.

U.S. house prices were predicted to rise 4.0% this year and by an average 3.5% in 2021 and 2022. That suggests the trend since 2013 of house price rises outpacing consumer inflation would continue for the next three years at least, according to current inflation expectations.

Underscoring the view that the latest data showing a surge in house prices was not just a blip, over 60% of analysts, or 24 of 39 who responded to an additional question, said that trend would continue to hold for at least another year. The remaining 15 said less than a year.

“Three factors support relatively high home prices – undersupply after a decade of underbuilding, single-family housing attractiveness in a socially distancing world, and most importantly low interest rates,” said Nathaniel Karp, chief U.S. economist at BBVA.

“However, economic uncertainty remains elevated and the recovery after the pandemic could take time, which are the risks to the current valuations.”

U.S. house prices outlook: https://fingfx.thomsonreuters.com/gfx/polling/xlbvgjmgepq/Reuters%20Poll-U.S.%20house%20prices%20outlook.PNG

Already tight inventory levels have been squeezed to record lows after construction activity came to a grinding halt because of the coronavirus pandemic, and with no policy relief expected, home buyers may outbid each other and crank up prices.

Existing home sales reached a seasonally adjusted annual rate of 6 million units in August, the highest since the tail end of the previous housing boom in 2006, and were expected to average around 5.5 million units in the coming year.

“A surge in demand has put further strain on an already tight inventory. The latest supply of existing homes dropped below three months (of inventory) for the first time since records began in 1982, and that implies sales will ease back toward the end of the year,” said Matthew Pointon, property economist at Capital Economics.

When asked to rate the affordability on a scale of 1 to 10, with 1 as extremely cheap and 10 as very expensive, the poll gave a median of 7, up from 6 in the previous poll when predictions were for house prices to rise at a slower pace than currently expected.

“U.S. home prices are not yet at a level that is concerning,” said Matthew Gardner, chief economist at Windermere Real Estate. “That said, we need significant growth in the number of new homes built to meet current demand. If more units are not provided, we could see unsustainable upward price pressure in the resale market.”

(Reporting by Hari Kishan; Additional reporting and polling by Richa Rebello and Tushar Goenka; Editing by Ross Finley and Andrea Ricci)

Source:- Reuters poll – TheChronicleHerald.ca

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U.S. housing market to remain a bright spot in a weak economy – TheChronicleHerald.ca

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By Hari Kishan and Richa Rebello

BENGALURU (Reuters) – U.S. house prices will continue to surge well into next year and beyond, outpacing inflation and the overall economy, a Reuters poll of property analysts found, making it a bright spot against an otherwise gloomy economic backdrop.

In a stark reversal, the U.S. housing market – at the epicenter of the global financial crisis more than a decade ago – was expected to extend a helping hand to an economy severely battered by the coronavirus pandemic.

Buoyed by record-low interest rates and strong pent-up demand from a segment of the workforce largely unaffected by pandemic-induced job cuts, house prices will continue to rise over the next two years, the Sept. 15-29 poll of over 40 analysts showed.

U.S. house prices were predicted to rise 4.0% this year and by an average 3.5% in 2021 and 2022. That suggests the trend since 2013 of house price rises outpacing consumer inflation would continue for the next three years at least, according to current inflation expectations. [ECILT/US]

Underscoring the view that the latest data showing a surge in house prices was not just a blip, over 60% of analysts, or 24 of 39 who responded to an additional question, said that trend would continue to hold for at least another year. The remaining 15 said less than a year.

“Three factors support relatively high home prices – undersupply after a decade of underbuilding, single-family housing attractiveness in a socially distancing world, and most importantly low interest rates,” said Nathaniel Karp, chief U.S. economist at BBVA.

“However, economic uncertainty remains elevated and the recovery after the pandemic could take time, which are the risks to the current valuations.”

U.S. house prices outlook: https://fingfx.thomsonreuters.com/gfx/polling/xlbvgjmgepq/Reuters%20Poll-U.S.%20house%20prices%20outlook.PNG

Already tight inventory levels have been squeezed to record lows after construction activity came to a grinding halt because of the coronavirus pandemic, and with no policy relief expected, home buyers may outbid each other and crank up prices.

Existing home sales reached a seasonally adjusted annual rate of 6 million units in August, the highest since the tail end of the previous housing boom in 2006, and were expected to average around 5.5 million units in the coming year.

“A surge in demand has put further strain on an already tight inventory. The latest supply of existing homes dropped below three months (of inventory) for the first time since records began in 1982, and that implies sales will ease back toward the end of the year,” said Matthew Pointon, property economist at Capital Economics.

When asked to rate the affordability on a scale of 1 to 10, with 1 as extremely cheap and 10 as very expensive, the poll gave a median of 7, up from 6 in the previous poll when predictions were for house prices to rise at a slower pace than currently expected.

“U.S. home prices are not yet at a level that is concerning,” said Matthew Gardner, chief economist at Windermere Real Estate. “That said, we need significant growth in the number of new homes built to meet current demand. If more units are not provided, we could see unsustainable upward price pressure in the resale market.”

(Reporting by Hari Kishan; Additional reporting and polling by Richa Rebello and Tushar Goenka; Editing by Ross Finley and Andrea Ricci)

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Ontario Regional Chief RoseAnne Archibald weighs in on rebuilding Canada's economy – CBC.ca

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Last week’s speech from the throne was a chance for the federal government to set up its vision for the future, amid the COVID-19 pandemic. And Ontario Regional Chief RoseAnne Archibald was listening closely.

It’s her job to work with the provincial and federal governments on issues relevant to local First Nations, and she says more concrete action is needed to ensure governments meet their reconciliation commitments.

“I heard a couple of things that I thought were hopeful and certainly could apply to First Nations. And those were the announcements around women in the economy and further investments in youth employment. So those things I thought were very positive,” Archibald said.

But she said she was greatly disappointed by the lack of attention to boil water advisories.

“In Ontario, we have 66 communities under boil water advisories and we have four that have do-not-consume orders. And that’s half of our communities. We have 133 First Nations in Ontario. And so that, to me, is not acceptable,” she said.

While the throne speech in 2019 set a clear target date of March 2021 to eliminate the long-term advisories, this year’s speech from the throne made no reference to that deadline. The federal government is apparently less comfortable with that goal, due to the pandemic, CBC learned from a senior government source. 

Indigenous Services Canada published this update on the progress of its commitment to end long-term drinking water advisories in First Nations communities on Feb. 15, 2020. (Indigenous Services Canada)

“The fact that the date of March 2021 was dropped from their original target date also speaks to the ability that they’re not going to meet their target date. We are still waiting for clean drinking water, a basic human right for First Nations,” said Archibald. 

The pandemic has also made it more difficult to get construction workers into communities.

There have been enough delays, says Archibald. “What we really need now, moving forward, is accelerated funding and accelerated action.”

“If these were 66 non-native communities, 66 municipalities, it would not be acceptable. There would be billions and billions of dollars and really swift action taken. And to me, that speaks to the systemic racism within government and within the whole system. And that has to change. We have to move beyond that. We have to come out of this pandemic in a better, better space than when we went in.”

Ontario First Nations facing big deficits

Archibald says if government wants an example of what swift, decisive action looks like, it should look to how Indigenous leaders have handled the pandemic in their communities. 

“Many of them lock down their communities. They took a harder line than, say, surrounding municipalities, on how to protect citizens, because they know that the health system within their community in many cases is non-existent or if it does exist there, it’s inadequate,” she said.

Community leaders were forced to make these hard choices because of a lack of government-provided infrastructure, said Archibald. For that, she says chiefs and councils across Ontario really deserve recognition for their “strong leadership.”

“They know that they don’t have clean drinking water, many of them. So how can they wash their hands with soap and water? They know that they are in a great disadvantage going into the pandemic and therefore had to take harder action,” she said.

“So if anybody’s really made a difference on the pandemic, it’s been First Nations and they’ve done so because of the chronic under funding by governments for their communities.”

Archibald acknowledges that, like all levels of government, First Nations are going to come out of the pandemic with serious deficits.

“Every government is going into debt right now in order to respond to the pandemic and First Nations are no different. The difference is the ability to recover,” said Archibald. 

Windsor Morning7:13Throne speech response

Hear from Ontario Regional Chief RoseAnne Archibald about last week’s throne speech — and what the federal government needs to do going forward, to continue the work of reconciliation. 7:13

The difference, she said, is First Nations’ communities don’t have the same tools other levels of government have to stimulate recovery when the dust settles. 

“The government of Canada, or even the government of Ontario, they have the ability to borrow [and] repay because they can rebuild their economies. And what are their economies based on? The land that everybody lives on, and that is treaty land.”

Everyone in Canada is a treaty holder, Archibald said.

“And when we think about rebuilding the wealth of Canada and rebuilding the wealth of Ontario — that is coming from First Nations, and we need to be a part of that.”

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