OTTAWA — A major global credit rating agency is issuing a new warning about federal debt that it says may become more difficult to tackle once the pandemic passes.
Fitch Ratings downgraded Canada’s triple-A credit rating in June, dropping the country to an “AA+” rating over what it called “the deterioration of Canada’s public finances” due to COVID-19.
The decision came out before the Liberals released an updated outlook in early July for federal spending, which projected a deficit of $343.2 billion and a debt of over $1.2 trillion.
Those figures were before the Liberals promised last week to spend $37 billion to revamp income support programs for hard-hit workers.
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Fitch says in a note that gross government debt will be 120 per cent of economic output, which is “significantly higher” than the median for a double-A rating.
The ratings agency says it expects government spending to drop sharply starting in 2021, but the current growing deficit will make reining in spending and the debt more challenging over the medium-term.
4:16 Coronavirus: Bank of Canada Governor says COVID-19 created ‘unprecedented fall in economic activity’
Coronavirus: Bank of Canada Governor says COVID-19 created ‘unprecedented fall in economic activity’
But it is also sending a signal about the political dynamics on Parliament Hill, with a looming speech from the throne that will outline a recovery plan that will require the Liberals to gain support from enough opposition MPs to win a confidence vote, or plunge the party into a federal campaign.
Fitch says it’s uncertain whether the Liberals and Prime Minister Justin Trudeau could capture a majority in a federal election. Newly elected Conservative Leader Erin O’Toole “presents a new dynamic,” the agency wrote, noting his leadership platform included a pledge to balance the budget.
“Regardless of which party is in power after 2020, the government faces deep fiscal and economic policy challenges and risks,” the Fitch note says.
The government has had to sharply ramp up spending since March when the pandemic swept into Canada, forcing the closure of businesses and workers ordered to stay home to slow the spread of COVID-19.
Those restrictions have since been rolled back, and economic output grew in May as a result.
On Friday, Statistics Canada will release gross domestic product readings for June and the second quarter of 2020. The average economist estimate is for a drop of nearly 40 per cent in GDP for the second quarter compared to the same three-month stretch in 2019, according to financial data firm Refinitiv.
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Fitch expects the economy to remain subdued and unemployment to remain high for the rest of the year, just as the federal government projected in its July economic snapshot.
Since then, some of the key political players have changed. Bill Morneau resigned as finance minister and was replaced by Chrystia Freeland, “who quickly announced the new spending measures,” Fitch wrote.
The Liberals are proposing three new benefits for workers costing $22 billion, to help those who don’t qualify for employment insurance, and easing access to EI at a cost of $7 billion.
The Canada Emergency Response Benefit, previously budgeted at around $80 billion, will be extended by four weeks at a cost of $8 billion. The latest federal figures show spending on the CERB surpassed $70 billion by the middle of this month.
New spending measures are expected this fall when the government updates spending plans. The Liberals have yet to introduce a budget for the fiscal year.
“We expect spending pressures to remain pronounced while unemployment remains high and economic activity subdued, and Canada’s decentralized fiscal framework, especially its large intergovernmental transfers, will increase the complexity of any fiscal adjustment,” the ratings agency wrote.
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“Failure to place consolidated gross general government debt/GDP on a downward path over the medium-term could lead to negative rating action.”
VANCOUVER – Contract negotiations resume today in Vancouver in a labour dispute that has paralyzed container cargo shipping at British Columbia’s ports since Monday.
The BC Maritime Employers Association and International Longshore and Warehouse Union Local 514 are scheduled to meet for the next three days in mediated talks to try to break a deadlock in negotiations.
The union, which represents more than 700 longshore supervisors at ports, including Vancouver, Prince Rupert and Nanaimo, has been without a contract since March last year.
The latest talks come after employers locked out workers in response to what it said was “strike activity” by union members.
The start of the lockout was then followed by several days of no engagement between the two parties, prompting federal Labour Minister Steven MacKinnon to speak with leaders on both sides, asking them to restart talks.
MacKinnon had said that the talks were “progressing at an insufficient pace, indicating a concerning absence of urgency from the parties involved” — a sentiment echoed by several business groups across Canada.
In a joint letter, more than 100 organizations, including the Canadian Chamber of Commerce, Business Council of Canada and associations representing industries from automotive and fertilizer to retail and mining, urged the government to do whatever it takes to end the work stoppage.
“While we acknowledge efforts to continue with mediation, parties have not been able to come to a negotiated agreement,” the letter says. “So, the federal government must take decisive action, using every tool at its disposal to resolve this dispute and limit the damage caused by this disruption.
“We simply cannot afford to once again put Canadian businesses at risk, which in turn puts Canadian livelihoods at risk.”
In the meantime, the union says it has filed a complaint to the Canada Industrial Relations Board against the employers, alleging the association threatened to pull existing conditions out of the last contract in direct contact with its members.
“The BCMEA is trying to undermine the union by attempting to turn members against its democratically elected leadership and bargaining committee — despite the fact that the BCMEA knows full well we received a 96 per cent mandate to take job action if needed,” union president Frank Morena said in a statement.
The employers have responded by calling the complaint “another meritless claim,” adding the final offer to the union that includes a 19.2 per cent wage increase over a four-year term remains on the table.
“The final offer has been on the table for over a week and represents a fair and balanced proposal for employees, and if accepted would end this dispute,” the employers’ statement says. “The offer does not require any concessions from the union.”
The union says the offer does not address the key issue of staffing requirement at the terminals as the port introduces more automation to cargo loading and unloading, which could potentially require fewer workers to operate than older systems.
The Port of Vancouver is the largest in Canada and has seen a number of labour disruptions, including two instances involving the rail and grain storage sectors earlier this year.
A 13-day strike by another group of workers at the port last year resulted in the disruption of a significant amount of shipping and trade.
This report by The Canadian Press was first published Nov. 9, 2024.
The Royal Canadian Legion says a new partnership with e-commerce giant Amazon is helping boost its veterans’ fund, and will hopefully expand its donor base in the digital world.
Since the Oct. 25 launch of its Amazon.ca storefront, the legion says it has received nearly 10,000 orders for poppies.
Online shoppers can order lapel poppies on Amazon in exchange for donations or buy items such as “We Remember” lawn signs, Remembrance Day pins and other accessories, with all proceeds going to the legion’s Poppy Trust Fund for Canadian veterans and their families.
Nujma Bond, the legion’s national spokesperson, said the organization sees this move as keeping up with modern purchasing habits.
“As the world around us evolves we have been looking at different ways to distribute poppies and to make it easier for people to access them,” she said in an interview.
“This is definitely a way to reach a wider number of Canadians of all ages. And certainly younger Canadians are much more active on the web, on social media in general, so we’re also engaging in that way.”
Al Plume, a member of a legion branch in Trenton, Ont., said the online store can also help with outreach to veterans who are far from home.
“For veterans that are overseas and are away, (or) can’t get to a store they can order them online, it’s Amazon.” Plume said.
Plume spent 35 years in the military with the Royal Engineers, and retired eight years ago. He said making sure veterans are looked after is his passion.
“I’ve seen the struggles that our veterans have had with Veterans Affairs … and that’s why I got involved, with making sure that the people get to them and help the veterans with their paperwork.”
But the message about the Amazon storefront didn’t appear to reach all of the legion’s locations, with volunteers at Branch 179 on Vancouver’s Commercial Drive saying they hadn’t heard about the online push.
Holly Paddon, the branch’s poppy campaign co-ordinator and bartender, said the Amazon partnership never came up in meetings with other legion volunteers and officials.
“I work at the legion, I work with the Vancouver poppy office and I go to the meetings for the Vancouver poppy campaign — which includes all the legions in Vancouver — and not once has this been mentioned,” she said.
Paddon said the initiative is a great idea, but she would like to have known more about it.
The legion also sells a larger collection of items at poppystore.ca.
This report by The Canadian Press was first published Nov. 9, 2024.
