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Economists warn Trudeau and his cabinet that the economy is set to ‘slow significantly’

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On the second day of the federal cabinet retreat, Prime Minister Justin Trudeau and his ministers heard from a trio of economists who came bearing grim news about Canada’s economic outlook.

The economy is expected to weaken considerably, unemployment will tick up and inflationary pressures may not ease as quickly as hoped, the economists — Kevin Milligan of the University of British Columbia, Carolyn Wilkins of Princeton University and Anil Arora of Statistics Canada — told a morning session of cabinet.

“There are some serious risks for the next year,” Milligan told reporters after meeting with Trudeau and other ministers in Hamilton.

“The most likely scenario is that we hit a soft spot. We ought to be aware of those short-run challenges.”

Milligan said “policymakers should keep that in mind” before they commit to any major new expenditures — spending that could blow a big hole through the federal budget at a time when the economy is shaky.

Ottawa is considering some new spending, including a sizeable increase to the Canada Health Transfer (CHT) to help prop up a health-care system that is facing a litany of challenges.

As part of the NDP-Liberal supply and confidence agreement, the government also has agreed to stand up some sort of national pharmacare program by year’s end — a policy that likely would cost the federal treasury billions of dollars.

“I would say we can expect the economy to slow significantly, the unemployment rate will rise. Whether or not we have a hard landing is something no one really knows but I wouldn’t rule it out in any good plan,” said Wilkins.

Kevin Milligan, professor of economics at the University of British Columbia, speaks to the media at the Hamilton Convention Centre, in Hamilton, Ont., during the second day of meetings at the Liberal Cabinet retreat on January 24, 2023. (Nick Iwanyshyn/Canadian Press)

A “hard landing” means a marked economic slowdown or sharp downturn following a period of rapid growth. Policymakers and central bankers have been trying to orchestrate a “soft landing,” a cyclical slowdown in economic growth that avoids a recession.

If unemployment spikes, however, that could actually alleviate inflation, Wilkins said.

With the job market so tight, wages have grown considerably — which in turn are pushing up prices.

If there’s some slack in employment, that might put some downward pressure on the cost of services, Wilkins said. That could help the inflation picture overall, as higher service costs have proven to be “stickier” than the price of hard goods, she added.

A slumping economy could weaken Ottawa’s fiscal health, further pushing up the multi-billion dollar deficit and piling on more debt. The national debt increased from $628.9 billion in 2015 to $1.1 trillion in 2022.

An ambitious stimulus package to prop up a faltering economy could, in turn, juice inflation, which is already at a level not seen in decades.

Government prepared to do less, Freeland says

Finance Minister Chrystia Freeland said Tuesday that, with the outlook gloomy, the government must act prudently.

If tax revenues take a dive, the government will do less, she said.

“I think that’s the approach governments should always take. We’re very, very focused on taking the fiscally responsible approach,” Freeland said.

There’s also a lot of global uncertainty, Freeland said, which compels Ottawa to proceed with caution.

She pointed to China’s decision to dump its “zero COVID” policy, which could lead to strong economic growth in that part of the world as restrictions are relaxed.

But runaway growth in China is a double-edged sword because it could push up global energy prices as the country consumes more oil and gas — a development that could have ramifications for other industrialized economies.

There’s one budget item the government says it will deliver, despite the economic headwinds: more health-care funding for the provinces and territories.

Freeland said the government is “committed to doing our share” on health and promised to be “faithful” to the party’s 2021 election platform commitments, which included a pledge to hire 7,500 doctors and nurses, improve long-term care homes, make mental health services more readily available and hire tens of thousands of personal support workers (PSWs).

“We’re going to have to weather the 2023 economic storm together,” Randy Boissonnault, the associate federal finance minister, told Power & Politics on Tuesday.

MP Randy Boissonnault, Canada’s associate finance minister, conceded Tuesday that it’s going to be a “turbulent” year for the economy. He insisted the government still has some spending room for big priorities.

“There’s a lot of uncertainty so we’re going to be watching this every step of the way as we get ready for the budget,” Boissonault said.

“We still have some fiscal room to be able to do things we need to do, but the fiscal room has tightened.”

He said Ottawa is still prepared to do “big ticket items” in a “responsible way.”

Asked whether a multi-billion dollar boost to health transfers could put Canada on shaky fiscal ground, Milligan said it’s likely the money will be doled out over the long-term, meaning the budget hit will not be as pronounced in any one year.

Ottawa’s forecast was too optimistic, says report

On Monday, a joint report from the Business Council of Canada and Bennett Jones warned that the fiscal forecast laid out in the last federal budget and the fall economic statement was probably too rosy.

The report, written by former Bank of Canada governor David Dodge and former Liberal finance policy adviser Robert Asselin, said the government’s forecast was based on a “plausible but optimistic” set of economic and interest-rate assumptions that are unlikely to come true.

They warn there is a “high likelihood of a more severe recession” this year and that the Liberal promises on everything from health-care funding and enhanced national defence spending to infrastructure improvements and climate change are going to cost a lot more than projected.

Boissonnault said that report is one of many the government will look to as it makes its economic forecast ahead of the next budget.

He said he thinks the fiscal reality will fall somewhere between the best- and worst-case scenarios laid out in Freeland’s fall economic statement.

That fiscal update forecast a deficit of $36.4 billion for the 2023-24 fiscal year. There’s a risk that deficit projection might never materialize — it could end up much worse.

In the November fiscal update, Freeland presented what she called a “downside scenario” for growth and employment — one in which a recession results in thousands of lost jobs, fewer taxes collected, a spike in employment insurance (EI) payments, an increase in debt servicing costs and a dramatically higher deficit — $49.1 billion in 2022-23.

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A timeline of events in the bread price-fixing scandal

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Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.

Here’s a timeline of key events in the bread price-fixing case.

Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.

Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.

Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.

Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).

Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.

June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.

Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”

Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.

July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.

Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)

The Canadian Press. All rights reserved.

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S&P/TSX composite up more than 250 points, U.S. stock markets also higher

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TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.

The S&P/TSX composite index was up 254.62 points at 23,847.22.

In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.

The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.

The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.

The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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Construction wraps on indoor supervised site for people who inhale drugs in Vancouver

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VANCOUVER – Supervised injection sites are saving the lives of drug users everyday, but the same support is not being offered to people who inhale illicit drugs, the head of the BC Centre for Excellence in HIV/AIDS says.

Dr. Julio Montaner said the construction of Vancouver’s first indoor supervised site for people who inhale drugs comes as the percentage of people who die from smoking drugs continues to climb.

The location in the Downtown Eastside at the Hope to Health Research and Innovation Centre was unveiled Wednesday after construction was complete, and Montaner said people could start using the specialized rooms in a matter of weeks after final approvals from the city and federal government.

“If we don’t create mechanisms for these individuals to be able to use safely and engage with the medical system, and generate points of entry into the medical system, we will never be able to solve the problem,” he said.

“Now, I’m not here to tell you that we will fix it tomorrow, but denying it or ignoring it, or throw it under the bus, or under the carpet is no way to fix it, so we need to take proactive action.”

Nearly two-thirds of overdose deaths in British Columbia in 2023 came after smoking illicit drugs, yet only 40 per cent of supervised consumption sites in the province offer a safe place to smoke, often outdoors, in a tent.

The centre has been running a supervised injection site for years which sees more than a thousand people monthly and last month resuscitated five people who were overdosing.

The new facilities offer indoor, individual, negative-pressure rooms that allow fresh air to circulate and can clear out smoke in 30 to 60 seconds while users are monitored by trained nurses.

Advocates calling for more supervised inhalation sites have previously said the rules for setting up sites are overly complicated at a time when the province is facing an overdose crisis.

More than 15,000 people have died of overdoses since the public health emergency was declared in B.C. in April 2016.

Kate Salters, a senior researcher at the centre, said they worked with mechanical and chemical engineers to make sure the site is up to code and abidies by the highest standard of occupational health and safety.

“This is just another tool in our tool box to make sure that we’re offering life-saving services to those who are using drugs,” she said.

Montaner acknowledged the process to get the site up and running took “an inordinate amount of time,” but said the centre worked hard to follow all regulations.

“We feel that doing this right, with appropriate scientific background, in a medically supervised environment, etc, etc, allows us to derive the data that ultimately will be sufficiently convincing for not just our leaders, but also the leaders across the country and across the world, to embrace the strategies that we are trying to develop.” he said.

Montaner said building the facility was possible thanks to a single $4-million donation from a longtime supporter.

Construction finished with less than a week before the launch of the next provincial election campaign and within a year of the next federal election.

Montaner said he is concerned about “some of the things that have been said publicly by some of the political leaders in the province and in the country.”

“We want to bring awareness to the people that this is a serious undertaking. This is a very massive investment, and we need to protect it for the benefit of people who are unfortunately drug dependent.” he said.

This report by The Canadian Press was first published Sept. 18, 2024.

The Canadian Press. All rights reserved.

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