Economy

Justin Trudeau Pivots From Scandal With Rebuild of Canadian Economy

Published

4 years ago

September 24, 2020

OTTAWA—Canadian Prime Minister Justin Trudeau laid out his plans to rebuild the country’s economy, in an effort to address damage done by the coronavirus pandemic and turn the page on a scandal over the awarding of a contract.

His Liberal government outlined the broad strokes of its near-term agenda in a ceremonial speech to Parliament. The plans include a renewed focus on social policy, with an emphasis on increasing child-care spaces and improving care for the elderly. The government pledged to maintain financial support for the hardest-hit industries, target spending to foster growth in the clean-technology sector and work toward helping the economy add another one million jobs to reach pre-pandemic levels.

Advanced economies such as Canada “are realizing that things should not go back to business as usual. Covid-19 has exposed the vulnerabilities in our societies,” according to a copy of the speech, which was read by Canada’s vice regal. The government said its agenda would address gaps in its social system, invest in health care and create jobs. “This is not the time for austerity,” it said.

People waited at a Covid-19 testing facility in Toronto last week.

Photo: carlos osorio/Reuters

These initiatives, telegraphed by Mr. Trudeau and officials before Wednesday’s unveiling, have stirred worries among debt-rating agencies, economists and former officials about the price tag and whether it will harm the country’s fiscal profile. One firm, Fitch Ratings, stripped Canada of its triple-A rating this year.

“One of Canada’s strengths was that there was always a focus on debt sustainability,” said William Foster, vice president and lead Canada analyst at Moody’s Investors Service. “A shift away from that is not credit positive,” he said. The firm maintains a triple-A rating for the economy.

Fighting the spread of Covid-19 remains a priority, with data from Johns Hopkins University showing Canada has recorded about 8,000 confirmed cases in the past seven days, a sizable increase compared with about 5,100 in the previous one-week period.

In a televised address to Canadians, Mr. Trudeau said a second wave of Covid-19 infections is now under way in four of the country’s biggest provinces, warning, “We’re on the brink of a fall that could be much worse than the spring.”

Justin Trudeau added that the government is prepared to take on more debt to see a recovery through. “Low interest rates mean we can afford it,” he said. “While we’re still dealing with this pandemic, I don’t want you—or your parent, or your friend—to take on debt that your government can better shoulder.”

The prime minister runs a minority government in the Canadian legislature and therefore requires the support of at least one of three opposition parties to remain in power. The policy road map will come for a vote in the legislature, and some opposition politicians and political analysts have said the government likely would survive that vote. That could change after the government presents a budget plan this fall that includes the cost of some initiatives, they said.

This marks a crucial point for Mr. Trudeau and the Liberals as they attempt to frame the political debate for an election possibly next year, said Stewart Prest, a politics lecturer at Simon Fraser University in Burnaby, British Columbia. “They want a possible election to be about what the Liberals are doing for the economy and Canadians, and not a record associated with a recurring series of controversies,” he said.

Polls showed support for the prime minister and his government dwindled during the summer following revelations that the cabinet awarded a contract to WE Charity, a Toronto youth-oriented charity with financial ties to the prime minister’s family and other members of Liberal administration. The scandal prompted the finance minister to step down, and Mr. Trudeau faces his third probe by the country’s ethics watchdog for possible violation of conflict-of-interest laws. He has said he didn’t direct officials to award the contract to WE Charity.

The new policies show an effort by Mr. Trudeau to shift the focus now to a public that is suffering heightened levels of economic anxiety from the pandemic, according to David Coletto, chief executive of Ottawa-based Abacus Data.

Vancouver on Tuesday. The government said it is focusing on helping women return to the workforce.

Photo: Liang Sen/Xinhua/Zuma Press

The government said it is focused on increasing child-care capacity and helping women to either return to the workforce or be more productive if working from home. Child-care spaces have reopened, but some centers are operating at reduced capacity. The pandemic pushed women’s participation in the labor force to its lowest level in three decades, at 55%, official data indicate. It has since recovered, but at a slower pace than men.

“We must not let the legacy of the pandemic be one of rolling back the clock on women’s participation in the workforce,” the government said.

The Liberal government also wants to deal with vulnerabilities in elderly care, such as staffing shortages and unsanitary conditions—some of which were exposed after military personnel were sent to nursing homes dealing with Covid-19 outbreaks. About 70% of Canada’s Covid-19 deaths originated in cases from nursing homes, one of the highest shares in the developed world.

Justin Trudeau has signaled the new agenda would come with a hefty price tag that would add to an already sizable expansion in debt since the onset of the pandemic.

Canada’s fiscal response to the pandemic was one of the strongest among advanced economies as a share of gross domestic product, according to the Organization for Economic Development and Cooperation. Direct support to date for companies and households amounted to over 10% of GDP for a total of 214.2 billion Canadian dollars, or the equivalent of $161 billion. It also sparked an upswing in the ratio of Canadian government debt to GDP, which was forecast in the summer to jump to roughly 50% or over C$1 trillion, from the 30% range in 2019-20.

“Canada would have had a deeper recession and a bigger long-term deficit if the government had done less,” the government said in the speech. The government said it would commit to a fiscally sustainable plan, while also taking advantage of low-cost borrowing to finance its recovery plan.

Write to Paul Vieira at paul.vieira@wsj.com

Source:- The Wall Street Journal

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Economy

Canada’s unemployment rate holds steady at 6.5% in October, economy adds 15,000 jobs

Published

1 day ago

November 8, 2024

Anne Joseph

OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.

Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.

Business, building and support services saw the largest gain in employment.

Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.

Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.

Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.

Friday’s report also shed some light on the financial health of households.

According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.

That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.

People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.

That compares with just under a quarter of those living in an owned home by a household member.

Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.

That compares with about three in 10 more established immigrants and one in four of people born in Canada.

This report by The Canadian Press was first published Nov. 8, 2024.

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Economy

Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

Published

3 days ago

November 6, 2024

Anne Joseph

The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.

The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.

CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.

This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.

While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.

Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.

The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.

This report by The Canadian Press was first published Nov. 7, 2024.

Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.

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Economy

Trump’s victory sparks concerns over ripple effect on Canadian economy

Published

3 days ago

November 6, 2024

Anne Joseph

As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.

Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.

A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.

More than 77 per cent of Canadian exports go to the U.S.

Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.

“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.

“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”

American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.

It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.

“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.

“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”

A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.

Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.

“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.

Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.

With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”

“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.

“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”

This report by The Canadian Press was first published Nov. 6, 2024.

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