The federal government is adding $10-billion to the credit it makes available to businesses, and the Bank of Canada has announced an emergency rate cut to buttress the economy as it struggles with the coronavirus crisis and plunging oil prices.
Bank of Canada Governor Stephen Poloz joined Finance Minister Bill Morneau and Superintendent of Financial Institutions Jeremy Rudin at a news conference on Friday to announce the second steps in Ottawa’s response to the economic fallout from COVID-19.
Earlier this week, Ottawa unveiled $1-billion for health research, unemployment insurance measures and help for the provinces.
Mr. Poloz said he’s cutting the key overnight lending rate by 50 basis points to 0.75 per cent, saying the measure is needed not only because of economic fallout from the coronavirus but also the significant drop in oil prices. Crude prices are down nearly 50 per cent so far this year in a price war between producers Russia and Saudi Arabia.
Mr. Morneau announced that $10-billion in additional credit will be available to Canadian businesses affected by the economic fallout through Ottawa’s Business Development Bank and Export Development Canada.
The federal budget, scheduled for March 30, will be delayed, but Mr. Morneau promised to unveil a “significant stimulus program” next week. Government House Leader Pablo Rodriguez did not give a new date for the budget.
“These are extraordinary times and that means we are ready to take extraordinary measures,” Mr. Morneau said.
He said Prime Minister Justin Trudeau will have a conference call on Monday with leaders of the G-7 about the impact of coronavirus.
Mr. Poloz said the message should be clear that the government is ready to do what it takes to keep the economy sound.
“There are significant measures happening today and next week which I think people should see as a co-ordinated and very powerful package,” he said.
The governor said he is concerned about how consumer and business confidence can weather the economic fallout, and warned that, without confidence, recovery could be prolonged.
“So these actions are meant to buttress that confidence and get us a bridge across the trouble,” he said.
The Bank of Canada also announced it will help improve liquidity for a key part of the loan market by agreeing to buy banker’s acceptances from financial institutions. These are a type of short-term loan commonly used by small and mid-sized businesses.
Bank of Montreal chief economist Douglas Porter said the Friday afternoon announcements indicate “just how unusual these times are.”
He noted the Bank of Canada’s cut in its benchmark overnight rate is the second reduction in a little more than a week. The overnight rate sets the basis for Canadian banks’ prime interest rates.
Mr. Porter said he was a bit surprised by the timing of the rate cut. He thought the central bank might have waited until the next decision from the U.S. Federal Reserve.
“Obviously, urgent times call for urgent measures,” Mr. Porter said.
Mr. Rudin, the federal banking regulator, said the Office of the Superintendent of Financial Institutions (OSFI) will reduce the amount of cash major banks are required to keep in reserve for emergencies, called the domestic stability buffer.
He said the buffer was last set at 2.25 per cent of banks’ risk-weighted assets, and will be reduced to 1 per cent. Mr. Rudin said OSFI calculates this measure will support more than $300-billion of additional lending capacity by the major banks. “We are encouraging these institutions to use this capital … as required,” he said.
Toronto Dominion Bank senior economist Brian DePratto called the $10-billion in additional credit support for businesses and eased reserve requirement for banks a “solid step in the right direction” for Ottawa. He said he expects additional fiscal measures “of at least equal size to support individuals and households” in Mr. Morneau’s announcement next week.
Mr. DePratto said he expects the measures would also help the self-employed and those who don’t work enough hours to qualify for Employment Insurance.
“Social and economic disruptions related to the virus will likely worsen in the coming weeks, but with the right supports in place, including those announced today, the peak economic impact has a good chance of being contained to a relatively short period,” he said. “It will be hard to avoid an economic contraction in the second quarter due to social distancing efforts by businesses and overall activity, but a near-term recession is certainly not a forgone conclusion.”
Mr. Morneau said the government is still looking for the best way to deliver financial help to those who need it the most, whether they are eligible for Employment Insurance or not.
“We need to think about how we can appropriately ensure that we can support people in different situations, and that is the work we are doing right now,” he said.
Conservative MP Pierre Poilievre said Ottawa must avoid creating new bureaucratic structures to deliver the aid, and that new measures must be temporary to avoid fueling a long-term deficit.
NDP MP Peter Julian said the government’s priority should be helping all affected workers, especially those without access to Employment Insurance or who work in precarious conditions.
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.
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.
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.