Governments across the world have rolled out extensive financial packages to support individuals, businesses and large corporations affected by the COVID-19 pandemic.
The US and Australian stimulus packages each represent about 10% of GDP. New Zealand’s program is about 5% of GDP, but each country is experiencing the economic shock differently, has different existing safety nets and priorities, and different mechanisms to deliver this assistance.
These support packages will play a significant role in shaping our world for many years, and we should not allow the clear emergency of the situation to stop us questioning their design.
Our work on economic recovery following natural hazards and disasters defines a set of build-back-better goals, and how they should be assessed.
This kind of thinking applies equally to our current predicament. We argue that globally, the purpose of COVID-19 stimulus packages should be threefold, and we should assess them against these three goals:
make sure people’s basic needs are satisfied
make it possible for the economy to spring back into action once the necessary social distancing measures are relaxed
use these funds to create positive change, and rebuild areas we previously neglected (in many countries, this will mean investing in public health systems).
To achieve the first goal of making sure people can meet their basic needs, many high-income countries – including the US, Greece, the UK and France – are either providing direct payments to all citizens (as in the US) or targeted support to those who lost income or jobs.
These payments are sometimes a fixed proportion of each recipient’s previous income, up to a cap (as in the UK), or are identical for everyone who has lost income (as in New Zealand).
From an economic perspective, it is clearly more efficient to provide support only to the people who really need it – those who have lost income and would not be able to support themselves and their dependants.
But these programs are also shaped by politics and ethics, and different countries chose different ways to distribute this assistance, not always based on need.
Restarting economies
Even better are programs that provide the wage subsidies through existing employers, such as Germany’s famed Kurzarbeit program (which translates to “work with shorter hours”) which was implemented during the 2008 global financial crisis.
New Zealand’s wage subsidy package is a similar program. It supports businesses to continue paying their staff even if they are unable to work.
Details of payments to businesses are posted online, to make sure employers comply and transfer these funds to their employees. This initiative was trialled after the 2011 Christchurch earthquake.
A similar support was also implemented in Australia.
Generally, wage subsidies allow for continued employment of individuals who would otherwise be let go, and they will also assist in achieving the second goal of resuming economic activity once restrictions are relaxed.
Such programs have been shown to be effective in Germany and New Zealand in ameliorating unexpected shocks.
While employees need support, directly or indirectly, it is also important that small and medium-sized businesses are propped up so they are ready to forge ahead once it is possible to do so. They should receive grants and subsidised loans to pay their costs, other than wages. Otherwise many businesses will fail, and the recovery will be slow and hard.
Global impacts
Whether large corporations need to receive support depends partly on the longer-term importance of their sector. It is easier to justify support for national airlines, which are an important linchpin in many countries’ global ties, than to support fossil fuel producers, for example.
Nor are there many reasons why taxpayers (present and future) should bail out wealthy individual owners of large businesses, when these businesses could be restructured in bankruptcy proceedings that should not lead to their shutdown.
But the COVID-19 pandemic has impacts well beyond individual countries and their economies and may require global support mechanisms.
Most low- and middle-income countries have either not yet announced any assistance or their packages are less than 1% of GDP. They typically cannot afford more with their existing debt levels.
It is therefore incumbent on high-income countries that can afford larger fiscal support packages to help countries that cannot. But so far only a handful of high-income countries, including Finland and Norway, have provided such support.
The international institutions supported by the rich world, such as the International Monetary Fund (IMF) and the World Bank, should pull out all the stops and lend enough, and at concessionary rates, to low-income countries so they can, at the very least, provide for their people’s basic needs.
Without that support, the virus will continue to spread in low-income countries and defeat the draconian social distancing measures that almost every country is implementing now.
Finally, it is important that we scrutinise these programs carefully now, rather than only once the public health emergency has passed and they have been entrenched. The sums involved are incredibly large and we will be remiss if we mis-spend what we are now borrowing from our children and grandchildren.
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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.
