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Newest homebuyers could pay the price for Canada's financial stability –



As in previous years, reading the Bank of Canada’s annual Financial System Review can be enough to send your pulse racing, and not in a good way.

On the bright side, this time around, those most likely to suffer from the bank’s warnings will be young enough to withstand the health effects of heart palpitations.

The main reason why the Financial System Review can be worrying — just as it was last year, when it warned of the dangers of rising mortgage debt when few thought high inflation would be a problem — is that the Bank of Canada’s main aim is to tell us all what could go wrong, to offer solutions and to help us prepare.

Unexpected but worrying

Again this time, as Bank of Canada governor Tiff Macklem and his chief deputy, Carolyn Rogers, laid out their most ominous scenarios at Thursday’s news conference, they added a proviso.

“This is not what we expect to happen,” Macklem assured reporters after laying out a chilling series of potential events that could seriously damage the fortunes of those who poured their savings into a home during the pandemic as prices soared 50 per cent and interest rates plunged.

For those people, many of them young buyers hoping to get a first foot on what they expected would be a “property ladder,” the dire warnings may sound louder than the reassurances.

Macklem and Rogers insisted that since the vast majority of Canadians had paid off their mortgages or had manageable debt, the wider financial system was in little danger. But due to the absolute necessity of fighting inflation with rising interest rates, people who got in at the peak may be in trouble, especially if they lose their jobs. With jobs numbers on Friday predicted to remain strong, that seems far away, but things can change in a period of rising rates.

“If the economy slowed sharply and unemployment rose considerably, the combination of more highly indebted Canadians and high house prices could amplify the downturn,” Macklem said.

The central bankers reminded us that, in theory, the most recent buyers had a financial pad since “stress test” rules required buyers to have the financial capacity to pay a lot more than mortgage lenders were asking. But that did not mean young buyers had set aside the cash in an emergency account. Nothing prevented them from spending it on the inevitable necessities that come with a new home.

“If those highly indebted households lose their jobs, they would likely need to reduce their spending sharply to continue servicing their mortgage,” Macklem added, though where highly indebted and newly unemployed people would get the cash to do that is far from obvious.

Moderation or default?

Neither questioners nor central bankers uttered the word “default,” but if conditions really were to get as bad as the bleak scenario above, the number of mortgage defaults would likely rise.

Similarly, while the central bankers repeatedly talked about a necessary “moderation” in the housing market, there was no mention of the kind of serious decline in prices that some analysts are predicting.

Just as in last week’s news conference with deputy governor Paul Beaudry, reporters asked Macklem to respond to calls by Conservative leadership front-runner Pierre Poilievre for the bank governor to resign, saying he let inflation get out of hand.

Although Macklem tried his best to deflect the questions, it is hard to see critics being mollified if a surge in interest rates helps spur defaults among young and vulnerable recent homebuyers.

Conservative leadership candidate Pierre Poilievre has slammed the central bank, saying governor Tiff Macklem let inflation get out of hand. (Ryan Remiorz/The Canadian Press)

Part of the logic for offering such a bleak forecast might be as a warning to the many Canadians who are still borrowing to buy houses at levels they may regret.

Figures released last week by TransUnion, a company that monitors household debt, shows despite the threat of rising rates, Canadian borrowing in the first three months of this year — including mortgages and lines of credit — was up more than nine per cent from the same period in 2021.

It seems everyone has a take on inflation and its consequences.

The World Bank and the Organization for Economic Co-operation and Development have warned of the dangers of stagflation. U.S. Treasury Secretary Janet Yellen testified to the U.S. Senate that high inflation would persist. Even rapper Cardi B and billionaire Elon Musk have weighed in with predictions of a recession, Canadian Business reports.

WATCH | Bank of Canada governor on threat to fire him over high inflation:

Bank of Canada governor on Pierre Poilievre’s threat to fire him

1 day ago

Duration 1:24

Tiff Macklem, governor of the Bank of Canada, said he will leave politics to the politicians when asked about Conservative leadership candidate Pierre Poilievre’s campaign promise to fire him.

According to Macklem, the situation remains “delicate,” a term he used more than once.

After what he called the biggest economic shock he hoped we would ever face, including “two years of a pandemic and unprecedented economic and social upheaval,” the governor implied he would reluctantly accept recession as the price of getting inflation under control.

The clear implication is that for financial stability, inflation is now a more important problem than a weakening housing market and that some of those who ignored last year’s warning that surging mortgage borrowing was an accident waiting to happen may be sacrificed for the greater good.

“The housing market, it’s an important part of the economy,” Macklem said. “We are watching it closely, but our focus ultimately is on the whole economy and in getting inflation back to target.”

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Russia is 'weaponizing' food, Joly tells Commonwealth partners – CBC News



Commonwealth leaders, meeting for the first time in four years, discussed food security and the risk of starvation as Canada’s foreign affairs minister sought to lay the blame for the impending crisis at the feet of Russia.

“What is clear to us is that Russia is weaponizing food, and putting a toll on many countries around the world, and putting 50 million lives at risk,” Mélanie Joly told reporters late Friday, while giving a recap of the first day of the Commonwealth meeting in Kigali, Rwanda.

Ukraine is the world’s fourth-largest grain exporter and reportedly has more 30 million tonnes of grain in storage, waiting for export. Farmers are said to be building temporary silos and are worried because the summer harvest is only weeks away.

The country’s Black Sea ports of Odesa, Pivdennyi, and Mykolaiv and Chornomorsk serve as major terminals — shipping about 4.5 million tonnes of grain per month, but a Russian naval blockade is preventing movement.

A recent report from the Washington-based Center for Strategic and International Studies (CSIS) concluded that Russia is taking advantage of transportation bottlenecks to attack Ukraine’s food storage facilities.

Russian forces have attacked grain silos across the country and stolen an estimated 400,000 to 500,000 tonnes of grain from occupied regions, according to Ukraine’s Defence Ministry.

The CSIS report, posted online on June 15, noted “Russia destroyed one of Europe’s largest food storage facilities in Brovary, roughly 19 kilometres northeast of Ukraine’s capital of Kyiv.”

Journalists walk inside a destroyed warehouse for storing food, after an attack by Russia 12 days prior in Brovary, on the outskirts of Kyiv on March 29. (Rodrigo Abd/The Associated Press)

The subject of the Russian blockade of Ukraine grain exports will also be at the centre of the G7 leaders meeting, beginning Sunday in Germany.

Russian President Vladimir Putin last week delivered a scathing critique of the crisis, blaming the U.S. and not the Russian military actions in Ukraine for endangering food security, and rising inflation and fuel prices.

He reinforced the message in a phone call last week with South African President Cyril Ramaphosa, who was one of the Commonwealth leaders to skip this week’s meeting.

Africa is heavily reliant on Ukrainian and — to a lesser extent — Russian grain.

For those leaders who did show up in Rwanda, Joly said Canada has been clear in assigning blame for the crisis. 

Sanctions not to blame, Joly says

“This is not the fault of the Western sanctions,” she said. “This is really Putin’s war of choice that is affecting food security around the world.”

Ten members of the Commonwealth abstained from condemning Moscow’s invasion of Ukraine in a United Nations resolution last spring.

Joly said she believes Canada made “headway” at the conference in convincing some of those nations to stand more firmly with Ukraine, but she wasn’t specific.

In a policy session held before the meeting of Commonwealth leaders, there was a call for African countries to be more self-sufficient in food supplies to offset imports.

Agnes Kalibata, president of the Alliance for a Green Revolution in Africa (AGRA), told the conference said that the agriculture sector in developing countries of the Commonwealth is “heavily underinvested.” She called for adequate funding to boost “the sector productivity, strengthen its resilience and deal with climate change, as well as create jobs, according to local media reports.

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Immigration Minister: Applicants can soon expect normal service standards – Canada Immigration News



Published on June 25th, 2022 at 08:00am EDT
Updated on June 25th, 2022 at 08:29am EDT


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Canada’s Immigration Minister Sean Fraser believes meaningful steps are being taken to get the immigration system back on track.

Fraser acknowledged ongoing application processing and client experience challenges when he sat down with CIC News for an exclusive interview in Toronto earlier this week.

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Minister expects things to return to normal by the end of 2022

“The COVID-19 pandemic hampered our immigration system in two main ways. It shut down a lot of our offices around the world…we lost a lot of our horsepower as a department.”

The second way, he explained, was Immigration, Refugees and Citizenship Canada (IRCC) needed to pivot to transitioning those in Canada to permanent residence since travel restrictions limited the ability of those abroad to enter the country. This was happening as new applications continued to flow in, leading to an accumulation of inventory. Then in August 2021, Canada made the commitment to resettle 40,000 Afghan refugees following the Taliban reclaiming power of Afghanistan and since February 2022, Canada has been looking to assist those impacted by Russia’s invasion of Ukraine.

“The good news is I see light at the end of the tunnel…we’re on track right now to restore our pre-pandemic service standard by the end of this calendar year for virtually every line of business.”

Minister Fraser added the caveat that the service standard for Canadian citizenship applications may continue to lag a bit due to the inventory growing significantly at the start of the pandemic when in-person citizenship ceremonies were not an option.

Fraser: Three solutions to improve client experience and address backlogs

The minister believes the three solutions to improve the immigration system are “resources, policy, and tech.”

“On the resources side, we’ve added 500 more staff.” He also pointed out the additional $85 million and another $385 million allocated in recent federal budget announcements that will go towards improving application processing.

Meanwhile, Fraser believes Canada will need even higher levels of immigration to meet growing demand to gain Canadian permanent residence.

“The number one policy is our Immigration Levels Plan. We’re not going to chip away at the number of cases in the inventory if we don’t expand the numbers.”

In February, Fraser announced Canada would welcome over 430,000 immigrants annually beginning this year, by far the highest levels in Canadian history. He is set to announce the Immigration Levels Plan 2023-2025 by November 1st of this year, which may result in another increase in Canada’s targets.

With respect to the third solution, technology, the minister said that “digital platform modernization is going to greatly increase the reliability and pace of our system.”

“These measures are starting to have an impact…a couple of weeks ago we passed 200,000 permanent residents landed in Canada.” The minister noted this has broken the previous record by 1.5 months.

Work permits have almost 250% increased compared to last year.”

IRCC’s backlog has surged to 2.4 million persons during the pandemic and the department has struggled to achieve its own targets on the length of time it aims to process applications. Since the start of this year, it has made major announcements and changes as it seeks to reduce the backlog, processing times, and give its clients more certainty. In late January, minister Fraser held a press conference summarizing IRCC’s processing goals including the steps it was taking to increase staff capacity and modernize its processes and technology.

One of the benefits has been the reduction in the Express Entry backlog. The minister told CIC News that all-program Express Entry draws are tentatively set to resume on July 6. In addition, IRCC aims to get back to its pre-pandemic service standard of processing Express Entry applications within six months beginning in July.

Another benefit is that IRCC has introduced and is in the process of introducing more case trackers to allow applicants to review the status of their files. The minister says 17 lines of business will have case trackers by the end of this summer allowing applicants to digitally monitor their status.

While challenges remain, the minister expressed great optimism to CIC News.

“My sense is by the end of this calendar year, new applications coming in will have the kind of certainty that we’ll be able to meet our service standard and people will be dealing with 60 days or 6 months or 12 months, not an undetermined period of time.”

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Special interview series with Minister Fraser

CIC News sat down with the minister on June 21, 2022 to discuss the future of Canadian immigration.

Over the coming weeks, CIC News is releasing a special series of articles elaborating on the interview with Minister Fraser on topics including:

Minister Fraser was in Toronto to speak at Collision, one of the world’s largest technology conferences.

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Rwanda to Germany: Canada to elevate small Commonwealth nations’ concerns at the G7



KIGALI, Rwanda — Foreign Affairs Minister Mélanie Joly says Canada will be bringing the concerns of smaller Commonwealth nations to the G7 leaders in Germany Sunday, particularly the growing threat of famine.

Prime Minister Justin Trudeau and Joly arrived in Kigali, the capital of Rwanda, on Wednesday for the Commonwealth Heads of Government meeting, which has been dominated by the concerns of nations that are suffering from food scarcity.

She said Canada is in “listening mode” at the Commonwealth, where leaders of smaller nations are able to speak without the dominating presence of the United States, Russia and China.

Canadian officials have been trying to reinforce that the cause of the shortage is Russia’s illegal invasion of Ukraine.

“What is clear to us is that Russia is weaponizing food and putting a toll on many countries around the world, and putting 50 million lives at risk,” Joly told reporters Friday evening in Rwanda.

She said Russia has been targeting Ukrainian ports and grain silos and systematically preventing grain from reaching countries that need it.

Trudeau had attempted to meet with the chair of the African Union Commission, Moussa Faki Mahamat, for several days during the Commonwealth summit but the sit-down was repeatedly postponed and eventually cancelled.

Shortly after Trudeau arrived in Rwanda the government announced Canada would dedicate a new ambassador to the African Union, which has suffered from the food shortages inflicted on the continent as a result of the war between Russia and Ukraine.

Both Ukraine President Volodymyr Zelenskyy and Russian President Vladimir Putin have met with representatives of the African Union, with Russia blaming Russian sanctions for stopping up the flow of grain.

Trudeau travels to the Bavarian Alps in Germany for the G7 Summit Saturday night, where the conflict with Ukraine will be top of mind.

Joly said she spoke to her G7 counterparts Friday, and expects famine and safe passage for Ukrainian refugees to be the top concern.

Some of the other voices the prime minister has promised to centre at his international meetings belong to youth leaders who spoke at a dialogue event Saturday, focused on issues facing young people around the world.

Some of the delegates spoke about the devastating effects of climate change, particularly around remote island nations where infrastructure cannot withstand natural disasters and rebuilding efforts take years. The onslaught takes a toll on education and health services, one delegate told the forum.

This report by The Canadian Press was first published June 25, 2022.


Laura Osman, The Canadian Press

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