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Liberals begin cabinet retreat with cost of living, economy topping the agenda – CBC News



With Parliament getting ready for the return of MPs, the Liberal cabinet is kicking off three days of meetings in Vancouver today to hash out the government’s fall playbook, with the rising cost of living and the state of the economy expected to top the agenda.

“The tone going into this is getting down to business, getting the work done and delivering for Canadians on these big things that they expect from us and also are our priorities,” a senior government official told CBC News on background. 

“We’ve got these commitments and we are going to deliver on them.”

Delivering on those commitments once Parliament resumes on Sept. 19 will involve balancing the priorities of both Liberal supporters and the party’s parliamentary partners in the NDP.

Earlier this year, the Liberals and New Democrats struck a deal committing the NDP to voting with the minority Liberal government in the House of Commons on confidence votes until June of 2025, in exchange for the government meeting a number of benchmarks along the way.

The New Democrats say that at least two of those commitments must be met before the Christmas break if the Liberals want the deal to stay intact.

The NDP wants to see the first stage of a universal dental care plan roll out, initially covering families with kids under 12 that earn a family income of less than $90,000. The party also wants a one-time top-up to bring the Canada Housing Benefit up to $500, and says it wants that increase renewed in coming years if cost of living challenges remain.

The Canada Housing Benefit, developed by the federal government and the provinces, was launched in 2020 with joint funding of $4 billion over eight years. The benefit is meant to provide direct financial support to Canadians who are struggling with housing needs.

An NDP official speaking on background said that up to two million Canadians could benefit from the means-tested payments, with the federal government having earmarked $475 million in the budget for the initiative.

A floor, not a ceiling

The deal between the NDP and the Liberals set the end of this year as the deadline for both initiatives. New Democrats say that, so far, it appears those commitments will be fulfilled in time.

“On both those components, we are pretty close to where we want to go in negotiations,” a senior NDP official told CBC news on background. “I am confident that we will have something to tell media by the end of the month.” 

The NDP regards the phase one dental care commitment as only a first step. If the Liberals want their deal with the NDP to remain in place, New Democrats say, they must extend dental care to under 18s, seniors and people with disabilities by the end of 2023, before full implementation of the program by 2025. 

NDP Leader Jagmeet Singh meets with Prime Minister Justin Trudeau on Parliament Hill in Ottawa in 2019. The deal struck between the two parties earlier this year will see the NDP support the Liberal government on parliamentary votes, providing the Liberals meet certain commitments. (The Canadian Press/Sean Kilpatrick)

The NDP says that these two commitments are a floor, not a ceiling and they will be using opposition days, in-person meetings and private members bills to push for other measures this fall to help Canadians deal with the rising cost of living. 

Among those initiatives, the party says, will be a push to help families with one-time boosts to the GST rebate and the Canada Child Benefit, a call for more funding to help workers transition into green jobs, and a demand for further climate action. 

Helping Canadians cope with inflation

While it’s not clear which approaches the Liberal cabinet might discuss beyond boosting the housing benefit, Prime Minister Justin Trudeau said last week that his government is always looking for ways to ease the burden of inflation. 

“We have historic low unemployment right now, lots of people have jobs, but there is still real challenges and we are going to continue to do what is necessary to support vulnerable Canadians as we move forward,” Trudeau said. 

The prime minister added that, whatever his government does next to address the cost of living, it will be “careful not to do things that will accelerate or exacerbate the inflation crisis we’re facing.”

One proposal in the NDP/Liberal deal would re-focus the Rental Construction Financing Initiative (RCFI) on affordable units. 

The RCFI is a government program that provides low-cost financing to developers to help them build rental units in areas where the supply is low.

The government official said that Canadians should expect some announcements on housing and the cost of living focusing on British Columbia before, during and after the caucus retreat.

Building a green future

In the media release announcing the cabinet retreat, the PMO said that ministers also will discuss how the government can build “a green, healthy future for everyone.”

The government official said that this discussion will stretch across ministries as the government looks to ensure there are well-paid jobs in both the electric vehicle industry and the oilpatch.

New Democrats said they have been meeting with workers in the oilpatch who fear for their children’s economic futures as the economy moves away from fossil fuels.

The NDP said that while it will continue to press the Liberal government to act in that area, it won’t threaten the deal — even though there are some 2022 timelines requiring action in the agreement’s text.

The deal requires that the Liberals “move forward” on creating a Clean Jobs Training Centre to support, retrain and redeploy workers by this year, but the text of the deal is not specific on what has to happen for the deal to survive.

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The World Economy Is Slowing More Than Expected, a New Forecast Shows – The New York Times



Economies around the world are slowing more than expected, as Russia’s war in Ukraine drives inflation and the cost of energy higher, forcing the Organization for Economic Cooperation and Development on Monday to scale back its projections for growth in the coming years.

Although it shied away from forecasting a global recession, the organization downgraded its outlook, maintaining its expectation that global economic growth would be a “modest” 3 percent this year, and an even weaker 2.2 percent next year, down from 2.8 percent a few months ago.

“The world is paying a very heavy price for Russia’s war of aggression against Ukraine,” said Mathias Cormann, the organization’s secretary general.

The organization lowered its growth forecast in virtually all of the 38 countries it represents, which include most of the word’s advanced economies. It projected growth of just 3.2 percent for China for this year and 4.7 percent for next year, one of the lowest rates for the country since the 1970s, said Álvaro Santos Pereira, the O.E.C.D.’s chief economist.

Comparing its current projection with one issued at the end of last year, a gap of about $2.8 trillion in foregone output for 2023 emerged, a figure that is roughly the size of the French economy. That represented the organization’s rough estimate of the economic toll the war is taking on the global economy.

“The global economy has lost momentum in the wake of Russia’s war of aggression in Ukraine, which is dragging down growth and putting additional upward pressure on inflation worldwide,” the report said.

Europe remains the most vulnerable region, with several countries facing the threat of a recession. Germany, the European Union’s largest economy, is projected to contract by 0.7 percent next year, after growing only 1.2 percent this year. Both France and Italy are forecast to see growth of less than 1 percent next year.

In the United States, projected growth was scaled back to 1.5 percent this year, from 2.5 percent forecast in June, and to 0.5 percent in 2023, down from 1.2 percent in the June report.

Soaring inflation, fueled by the high price of energy and food, is driving the slowdown and spreading to other goods and services, weighing heavily on households and businesses. The high cost of energy and the threat of gas shortages in Europe remain key risks, as countries head into winter with storage tanks nearly full, but with uncertainty about how long they will last.

“The risks are very much tilted to the downside,” Mr. Cormann warned.

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The world economy has an ominous August 2007 kind of feeling – Axios



August 2007 was, on the surface, a fine month for the U.S. and global economy. Unemployment was low. The stock market had a few bumpy days, but nothing too dramatic.

Why it matters: Many consider it to be the beginning of what we now call the global financial crisis. And there are some ominous parallels with what the world is experiencing right now.

  • To be clear, we’re not predicting a new crisis as severe as the one that rocked the world in 2008. Rather, we’re arguing that major (and accelerating) underlying shifts are underway and likely to reverberate for years.
  • How significant the pain will be is hard to predict. It could vary significantly across countries and industries. It’s plausible that the economic damage in most sectors of the U.S. economy will be mild.

In this parallel, the tumult in Britain — where the currency and government bond prices are plunging — is the equivalent of when French bank BNP Paribas experienced funding problems due to mortgage losses.

  • The bank required a liquidity lifeline from the European Central Bank on Aug. 9, 2007, which many date as the beginning of the global financial crisis.
  • As it was then, the U.S. economy remains strong, and the financial disruptions across the Atlantic seem remote. But in that episode, they were in fact early manifestations of profound adjustments that were only beginning, and would eventually affect economies worldwide.

State of play: For a decade-plus after the 2008 crisis, the world was stuck in a low-interest rate, low-inflation, low-growth rut.

  • Central banks searched for novel ways to loosen monetary policy to stimulate demand, including negative interest rates and quantitative easing.
  • They concluded that the “neutral rate” of interest had become much lower, due to seismic forces like demographics and globalization.
  • The widespread view — reflected in bond prices and officials’ comments — was that after the pandemic’s disruptions passed, this low-rate normal would return. Until recently, at least.

What’s happened in the last few months — and with dizzying speed in the last several days — is that markets are adjusting to the possibility that the era of extremely low rates and liquidity is over, and the 2020s will be very different from the 2010s.

  • Consider that at the start of the year, a 30-year U.S. Treasury bond yielded 1.92%. That’s up to 3.62% as of 10:45am EDT this morning.
  • The effects of that repricing are only beginning to ripple through the economy. It’s most visible now in housing, but could eventually affect everything from the sustainability of large budget deficits to the viability of any business relying on lots of leverage.

Flashback: Donald Kohn, who played a key role in fighting the global financial crisis as the No. 2 official at the Fed, had some prescient comments last year.

  • “It’s possible that [the natural rate of interest] is higher than backward-looking models now suggest,” he said at the 2021 Jackson Hole symposium, noting loose fiscal policy and pent-up savings.
  • “But the transition to a higher rate environment could be pretty bumpy given that a lot of asset values and assessments of debt sustainability are built on very low interest rates for very long.”

What they’re saying: In a note out this morning, Joseph Brusuelas, chief economist at RSM, said that dollar funding markets have shown some of the strains they have in crises past (though not as severe.).

  • He writes that it is likely economies that have been “characterized by insufficient aggregate demand and low inflation over the past two decades, will now be characterized by insufficient aggregate supply, negative supply shocks, geopolitical tensions and higher inflation,” which require different monetary and fiscal policies.
  • “Fixed income markets are signaling a shift in perceptions of financial stability and raising a caution flag for investors,” he added.

The bottom line: We’re in the early days of seeing how a world of tighter money will play out across sovereign nations, real estate, the corporate sector and more.

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Energy, inflation crises risk pushing big economies into recession, OECD says – Reuters



PARIS, Sept 26 (Reuters) – Global economic growth is slowing more than was forecast a few months ago in the wake of Russia’s invasion of Ukraine, as energy and inflation crises risk snowballing into recessions in major economies, the OECD said on Monday.

While global growth this year was still expected at 3.0%, it is now projected to slow to 2.2% in 2023, revised down from a forecast in June of 2.8%, the Organisation for Economic Cooperation and Development said.

The Paris-based policy forum was particularly pessimistic about the outlook in Europe – the most directly exposed economy to the fallout from Russia’s war in Ukraine.

Global output next year is now projected to be $2.8 trillion lower than the OECD forecast before Russia attacked Ukraine – a loss of income worldwide equivalent in size to the French economy.

“The global economy has lost momentum in the wake of Russia’s unprovoked, unjustifiable and illegal war of aggression against Ukraine. GDP growth has stalled in many economies and economic indicators point to an extended slowdown,” OECD Secretary-General Mathias Cormann said in a statement.

The OECD projected euro zone economic growth would slow from 3.1% this year to only 0.3% in 2023, which implies the 19-nation shared currency bloc would spend at least part of the year in a recession, defined as two straight quarters of contraction.

That marked a dramatic downgrade from the OECD’s last economic outlook in June, when it had forecast the euro zone’s economy would grow 1.6% next year.

The OECD was particularly gloomy about Germany’s Russian-gas dependent economy, forecasting it would contract 0.7% next year, slashed from a June estimate for 1.7% growth.

The OECD warned that further disruptions to energy supplies would hit growth and boost inflation, especially in Europe where they could knock activity back another 1.25 percentage points and boost inflation by 1.5 percentage points, pushing many countries into recession for the full year of 2023.

“Monetary policy will need to continue to tighten in most major economies to tame inflation durably,” Cormann told a news conference, adding that targeted fiscal stimulus from governments was also key to restoring consumer and business confidence.

“It’s critical that monetary and fiscal policy work hand in hand”, he said.

Though far less dependent on imported energy than Europe, the United States was seen skidding into a downturn as the U.S. Federal Reserve jacks up interest rates to get a handle on inflation.

The OECD forecast that the world’s biggest economy would slow from 1.5% growth this year to only 0.5% next year, down from June forecasts for 2.5% in 2022 and 1.2% in 2023.

Meanwhile, China’s strict measures to control the spread of COVID-19 this year meant that its economy was set to grow only 3.2% this year and 4.7% next year, whereas the OECD had previously expected 4.4% in 2022 and 4.9% in 2023.

Despite the fast deteriorating outlook for major economies, the OECD said further rate hikes were needed to fight inflation, forecasting most major central banks’ policy rates would top 4% next year.

With many governments increasing support packages to help households and businesses cope with high inflation, the OECD said such measures should target those most in need and be temporary to keep down their cost and not further burden high post-COVID debts.

Reporting by Leigh Thomas, additional reporting by Tassilo Hummel; editing by Richard Lough, William Maclean

Our Standards: The Thomson Reuters Trust Principles.

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