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COVID-19 was 'expensive,' but Freeland says economy is improving in fiscal update – National Post

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The Liberal government is forecasting to end the current fiscal year $144.5 billion in the red

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OTTAWA – Finance Minister Chrystia Freeland offered few new economic measures in the Liberals’ fiscal update Tuesday, portraying the Canadian economy instead as well on the way to a post-pandemic recovery.

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Freeland delivered her speech in Parliament on Tuesday amid growing concerns about the Omicron variant of COVID-19, which appears to be spreading across the country. She said the government was budgeting $1.7 billion to buy more rapid tests and ship them out across the country to provinces.

Freeland said that funding will buy 180 million tests and provinces should use the ones they have in storage now.

“There is not a shortage of rapid tests today in Canada, and we have a lot more coming. I really urge Canadians, use rapid tests, use boosters, wear your masks.”

Freeland herself used rapid tests on Tuesday after two of her staff tested positive for COVID-19. She said she has since tested negative, but as a precaution gave the fiscal update virtually rather than appearing in person in Parliament.

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The government has also put aside $4.5 billion as a sort of contingency fund for Omicron related expenses, on top of money already set aside for wage and rent help for hard-hit industries. They have also budgeted $5 billion to help repair damage from the B.C. floods.

Freeland said the government’s plan during the pandemic was to ensure the economy came back as strong as possible.

“Keeping the Canadian economy on life support as we went into COVID-19 hibernation was expensive. But we knew that keeping Canadian families and businesses solvent would help our economy rebound,” she said.

According to the fiscal update, the government ended the last fiscal year, which ended in March, with a $327 billion deficit, down from the $354 billion it was projecting. It also is forecasting to end the current fiscal year $144.5 billion in the red, down roughly $10 billion from the $154.7 billion projected last year.

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Freeland touted job figures and GDP growth, which have trended positively in the last few months. She said the government wanted to ensure that Canada moved swiftly past the damage done by the pandemic, unlike what happened after the 2008 recession.

“We have already more than recovered lost jobs, a healing which took eight months longer after the much milder 2008 recession. And we are on track to recover lost GDP five months more quickly than after the 2008 contraction,” she said.

While the country has regained jobs and GDP growth, inflation has also soared in recent months, rising in October higher than it has been in nearly two decades. Freeland said the government is monitoring the impact, but believes inflation to be primarily a global phenomenon.

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“We know inflation is a global phenomenon driven by the unprecedented challenge of re-opening the world’s economy,” she said. “Turning the world economy back on is a good deal more complicated than turning it off.”

Conservative leader Erin O’Toole was quick to condemn the Liberals’ update as doing nothing for the inflation Canadians are seeing at grocery stores.

“Instead of delivering a plan to combat the cost of living crisis and secure our country’s recovery, the Liberal government is making life more expensive for Canadians,” he said. “Canadians cannot afford for life to get even more expensive – yet that’s exactly what the Liberals’ ideological agenda is doing.”

Freeland defended her party’s economic record pointing out the jobs lost in the pandemic have returned and said even with rising prices, Canadians are better off if they are working.

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“The single most important thing when it comes to the well being of most Canadians is having a job.”

O’Toole said the Liberal plan lacked vision and risked allowing Canada to fall behind its international peers.

“We can get back to building prosperity and great jobs for Canadians, but the Liberal government, as we heard today, has no plans to make that a reality.”

The Conservatives haven’t specifically ruled out supporting the government’s bill for pandemic benefits, but they have also not had many of their demands met.

The Liberals have offered some of what the NDP and the Bloc Québécois were seeking, including a fix for low-income seniors who received CERB payments and now face clawbacks to their Guaranteed Income Supplement.

The update puts aside $742.4 million for low-income seniors who may have taken both benefits and now face clawbacks.

The Bloc was also looking for support for cultural workers in Quebec who have not yet been able to return to regular gigs and performances and the government is putting $60 million aside for that.

• Email: rtumilty@postmedia.com | Twitter:

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Economy

Yellen Sounds Alarm on China ‘Global Domination’ Industrial Push – Bloomberg

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US Treasury Secretary Janet Yellen slammed China’s use of subsidies to give its manufacturers in key new industries a competitive advantage, at the cost of distorting the global economy, and said she plans to press China on the issue in an upcoming visit.

“There is no country in the world that subsidizes its preferred, or priority, industries as heavily as China does,” Yellen said in an interview with MSNBC Wednesday — highlighting “massive” aid to electric-car, battery and solar producers. “China’s desire is to really have global domination of these industries.”

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Opinion: The future economy will suffer if Canada axes the carbon tax – The Globe and Mail

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Open this photo in gallery:

Poilievre holds a press conference regarding his “Axe the Tax” message from the roof a parking garage in St. John’s on Oct.27, 2023.Paul Daly/The Canadian Press

Kevin Yin is a contributing columnist for The Globe and Mail and an economics doctoral student at the University of California, Berkeley.

The carbon tax is the single most effective climate policy that Canada has. But the tax is also an important industrial strategy, one that bets correctly on the growing need for greener energy globally and the fact that upstart Canadian companies must rise to meet these needs.

That is why it is such a shame our leaders are sacrificing it for political gains.

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The fact that carbon taxes address a key market failure in the energy industry – polluters are not incentivized to consider the broader societal costs of their pollution – is so well understood by economists that an undergraduate could explain its merits. Experts agree on the effectiveness of the policy for reducing emissions almost as much as they agree on climate change itself.

It is not just that pollution is bad for us. That a patchwork of policies supporting clean industries is proliferating across the United States, China and the European Union means that Canada needs its own hospitable ecosystem for clean-energy companies to set up shop and eventually compete abroad. The earlier we nurture such industries, the more benefits our energy and adjacent sectors can reap down the line.

But with high fixed costs of entry and non-negligible technological hurdles, domestic clean energy is still at a significant disadvantage relative to fossil fuels.

A nuclear energy company considering a reactor project in Canada, for example, must contend with the fact that the upfront investments are enormous, and they may not pay off for years, while incumbent oil and gas firms benefit from low fixed costs, faster economies of scale and established technology.

The carbon tax cannot address these problems on its own, but it does help level the playing field by encouraging demand and capital to flow toward where we need it most. Comparable policies like green subsidies are also useful, but second-best; they weaken the government’s balance sheet and in certain cases can even make emissions worse.

Unfortunately, these arguments hold little sway for Pierre Poilievre’s Conservatives, who called for a vote of no-confidence on the dubious basis that the carbon tax is driving the cost-of-living crisis. Nor is it of much consequence to provincial leaders, who have fought the federal government hard on implementing the tax.

Not only is this attack a misleading characterization of the tax’s impact, it is also a deeply political gambit. Most expected the vote to fail. Yet by centering the next election on the carbon tax debate, Mr. Poilievre is hedging against the possibility of a new Liberal candidate, one who lacks the Trudeau baggage but still holds the line on the tax.

With the reality of inflation, a housing crisis and a general atmosphere of Trudeau-exhaustion, Mr. Poilievre has plenty of ammunition for an election campaign that does not leave our climate and our clean industries at risk. The temptation to do what is popular is ever-present in politics. Leadership is knowing when not to.

Nor are the Liberals innocent on this front. The Trudeau government deserves credit for pushing the tax through in the first place, and for structuring it as revenue-neutral. But the government’s attempt to woo Atlantic voters with the heating oil exemption has eroded its credibility and opened a vulnerable flank for Conservative attacks.

Thus, Canadian businesses are faced with the possibility of a Conservative government which has promised to eliminate the tax altogether. This kind of uncertainty is a treacherous environment for nascent companies and existing companies on the precipice of investing billions of dollars in clean tech and processes, under the expectation that demand for their fossil fuel counterparts are being kept at bay.

The tax alone is not enough; the government and opposition need to show the private sector that it can be consistent about this new policy regime long enough for these green investments to pay off. Otherwise, innovation in these much-needed technologies will remain stagnant in Canada, and markets for clean energy will be dominated by our more forward-thinking competitors.

A carbon tax is not a panacea for our climate woes, but it is central to any attempt to protect a rapidly warming planet and to develop the right businesses for that future. We can only hope that the next generation of Canadian leaders will have a little more vision.

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Economy

Business leaders say housing biggest risk to economy: KPMG survey – BNN Bloomberg

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Business leaders see the housing crisis as the biggest risk to the economy, a new survey from KPMG Canada shows.

It found 94 per cent of respondents agreed that high housing costs and a lack of supply are the top risk, and that housing should be a main focus in the upcoming federal budget. The survey questioned 534 businesses.

Housing issues are forcing businesses to boost pay to better attract talent and budget for higher labour costs, agreed 87 per cent of respondents. 

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“What we’re seeing in the survey is that the businesses are needing to pay more to enable their workers to absorb these higher costs of living,” said Caroline Charest, an economist and Montreal-based partner at KPMG.

The need to pay more not only directly affects business finances, but is also making it harder to tamp down the inflation that is keeping interest rates high, said Charest.

High housing costs and interest rates are straining households that are already struggling under high debt, she said.

“It leaves household balance sheets more vulnerable, in particular, in a period of economic slowdown. So it creates areas of vulnerability in the economy.”

Higher housing costs are themselves a big contributor to inflation, also making it harder to get the measure down to allow for lower rates ahead, she said. 

Businesses have been raising the alarm for some time. 

A report out last year from the Ontario Chamber of Commerce also emphasized how much the housing crisis is affecting how well businesses can attract talent. 

Almost 90 per cent of businesses want to see more public-private collaboration to help solve the crisis, the KPMG survey found.

“How can we work bringing all stakeholders, that being governments, not-for-profit organizations and the community and the private sector together, to find solutions to develop new models to deliver housing,” said Charest.

“That came out pretty strong from our survey of businesses.”

The federal government has been working to roll out more funding supports for other levels of government, and introduced measures like a GST rebate for rental housing construction, but it only has limited direct control on the file. 

Part of the federal funding has been to link funding to measures provinces and municipalities adopt that could help boost supply. 

The vast majority of respondents to the KPMG survey supported tax measures to make housing payments more affordable, such as making mortgage interest tax deductible, but also want to maintain the capital gains tax exemption for a primary residence.

The survey of companies was conducted in February using Sago’s Methodify online research platform. Respondents were business owners or executive-level decision makers.

About a third of the leaders are at companies with revenue over $500 million, about half have revenue between $100 million and $500 million, with the rest below. 

This report by The Canadian Press was first published March 27, 2024.

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