Canada must focus on green and digital investment as part of its economic stimulus, with an eye to a recovery from COVID-19 that prioritizes the Canadians and businesses hardest hit by the pandemic, says Angel Gurria, secretary general of the Organisation for Economic Co-operation and Development.
Gurria gave a virtual talk Tuesday at the Empire Club of Canada, presenting the OECD’s latest economic outlook and reflecting on his past 15 years leading the international consortium through the global financial crisis in 2008-09 and the COVID-19 pandemic.
Gurria, a former minister of foreign affairs and minister of finance and public credit in Mexico, said that although things seem to be looking up for Canada and North America, with vaccines rolling in and predictions the economy will begin to rebound, we aren’t out of the woods yet. The biggest challenges right now are vaccine supply and rollout, and the new virus variants, he said.
He noted that it is the poorest and most vulnerable citizens who have been hit hardest by the health and economic implications of COVID-19, much like the poorest and most vulnerable countries themselves.
As the economy begins a slow climb out of the crisis, consumer confidence will be key, said Gurria, adding that Canada’s priorities should include fiscal support that takes citizens and businesses all the way through the recovery.
“Please, let’s not withdraw this support too soon,” he said. “In 2008-2009, we withdrew the support that was provided to the economy too soon. And by doing that…we weakened the recovery.”
Gurria expects the economic impact of COVID-19 to be long-lasting in the hardest-hit sectors, such as hospitality, and said the small and medium businesses in these sectors will need extra support.
“This will be echoed in the job market,” he added, among younger and low-paid workers who disproportionately work the jobs in these devastated sectors.
It’s important that Canada continues benefits like the Canada Recovery Benefit, said Gurria, but that it begins to more specifically target those benefits. The workforce, too, will need help catching up to the digital acceleration, he said.
Businesses will also need support to tackle the burden of debt created by the pandemic, said Gurria, and business insolvency procedures should be re-examined so that viable businesses have the opportunity to recover.
This support needs to also facilitate structural changes spurred or accelerated by the pandemic, such as the digital shift, Gurria said.
Digital policies should include improving widespread connectivity, both urban and rural, he added.
“The recovery from the crisis provides a unique opportunity to shape a greener, healthier, more inclusive, more digital economy,” he said.
Gurria said Canada should “green” its stimulus by investing in low-carbon tech, especially since the pandemic has made investments in young firms less likely.
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“Recent federal government proposals for carbon price increases announced as part of a strengthened climate plan are an encouraging sign in this regard,” he noted.
The pandemic has made it clear that Canada needs to strengthen its health-care system, Gurria said, especially its long-term care. The virus has also made clear the obvious gaps in pharmaceutical coverage and paid sick leave, he added.
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Overall, it will be crucial that Canada’s policies have well-being top of mind, he said, noting that the country is at a pivotal moment.
“With the right policies, Canada can emerge from this crisis with a stronger, more sustainable, more inclusive economy.”
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
