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RBA warns of big hit to the economy from pandemic – MarketWatch

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SYDNEY–The Reserve Bank of Australia left interest rates unchanged Tuesday and affirmed its current targeting of bond yields while warning the economy will be hit hard by the corona pandemic in the second quarter.

The RBA’s official cash rate was left at a record low 0.25%, the bank said. The three-year bond yield target was also kept at 0.25%.

“There is considerable uncertainty about the near-term outlook for the Australian economy…a very large economic contraction is expected to be recorded in the June quarter and the unemployment rate is expected to increase to its highest level for many years,” RBA Governor Philip Lowe said in a statement.

Interest rates are set to remain low for a long period, he added.

“The board is committed to doing what it can to support jobs, incomes and businesses as Australia deals with the coronavirus,” Mr. Lowe said.

“The Board will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2%-3% target band,” he added.

The RBA deployed alternative policy measures in March for the first time as the coronavirus pandemic forced social distancing on the population, shut firms and closed borders to international traffic.

When compared with other major economies, Australia has managed to limit the number of deaths from the coronavirus, but it has been hard hit nonetheless with tourism and education exports flattened while consumer spending has weakened.

Federal and state governments have responded to the pandemic with massive fiscal stimulus but despite the outlays, Australia is set to sink into its first recession since the early 1990s, economists have warned.

Data earlier Tuesday showed job advertisements fell by 10.3% in March, the biggest fall since the global financial crisis.

Still, consumer confidence was up with the ANZ attributing the rise to government measures to support incomes and keep workers on payrolls.

Write to James Glynn at james.glynn@wsj.com

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Canada can hit climate targets without ruining economy, economists and climate experts say – CBC.ca

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Last November, the United Nations Environment Program released its annual Emissions Gap Report, which found that in order to limit global warming to 1.5 C above pre-industrial levels, CO2 emissions would need to drop by 7.6 per cent annually over the next decade. 

Given that worldwide emissions are estimated to have risen by about 0.4 per cent in 2019, this seemed like an unattainable goal.

A recent study published in Nature Climate Change, however, suggests that as a result of global shutdowns due to the COVID-19 pandemic, emissions in 2020 could drop by roughly seven per cent.

At first glance, it might appear as though a devastating economic shutdown is the only way to reach those UN targets. But some experts say this isn’t the case, and insist there is a way to have economic growth and reduce emissions that adhere to the UN guidelines.

Storefronts in Ottawa’s Glebe neighbourhood are reflected in a window sign on March 24, 2020, during the COVID-19 pandemic. (Justin Tang/The Canadian Press)

“We can’t have this [kind of a shutdown] for tackling climate change — absolutely not,” said Corinne Le Quéré, a Canadian professor of climate change science at the University of East Anglia and lead author of the Nature study. “This is a really painful way to get a decrease in emissions.” She also noted that it likely won’t last.

Don Drummond, an economist who worked for the federal Department of Finance for 23 years, pointed out that emissions in Canada have almost flat-lined, on average, over the past few years during a period of economic growth (prior to the coronavirus pandemic).

This, he said, is evidence that reducing emissions to UN guidelines is possible.

“We’ve achieved higher growth with flattening emissions and we can and should go further and achieve positive growth with declining emissions,” said Drummond, an adjunct professor at Queen’s University and former chief economist at the Toronto-Dominion Bank. “That can be done, but we need a more concentrated policy effort.”

New opportunities

Drummond, who was one of the architects of the Goods and Services Tax in 1991, said there is a long history in Canada of scare-mongering that a given new policy will kill the economy, from the GST to the North American Free Trade Agreement. Quite often, it doesn’t.

Many governments around the world are trying to stimulate their economies during the pandemic, and this could be an opportunity to funnel money into green technologies, said Le Quéré.

There’s been an increase in the popularity of e-bikes, a green alternative to getting around cities. (Francois Mori/Associated Press)

She said that one of the key findings of the Nature study was that the biggest drop in emissions during the pandemic, behind the aviation industry, has been in surface transport. This, she said, could be one sector governments could target.

“The biggest reason why the emissions [went] down now is mobility. So we just don’t go anywhere. We don’t use our cars. Governments could say, ‘Well, we’re going to tackle that as we get out of confinement,'” Le Quéré said. That could “include everything from encouraging home-working for those who want to and who can, then developing infrastructure for … walking or cycling.”

While Drummond believes the federal government is likely to invest in methods to reduce emissions, he said it will likely be a long time — perhaps years — before we see stimulus packages aimed at revitalizing the economy, such as specific jobs programs.

In the meantime, he said the government can use other means to reach the 7.6 per cent emissions-reduction goal, such as disincentives — like the carbon tax on things like gasoline and heating fuels — which can be effective in bringing down emissions, particularly when that money is recycled back to people and businesses, as the federal government is doing.

“If you have the right incentives or the right disincentives in place, there can be growth that takes place that is not environmentally damaging,” Drummond said. 

“I would say put a price on it … that’s what it really comes down to.”

Another could be investing in retrofitting buildings to make them more efficient, which would be very labour-intensive and could create more jobs. But Drummond said that would be “second best.”

On the path

Mark Jaccard, a professor of sustainability energy at Simon Fraser University, said transitioning to renewable energy isn’t as costly as some may think it is.

He said it would cost “at most, two years of economic growth spread over a 30-year period.” (In recent years, Canada has experienced annual growth in the 1.5 to 1.9 per cent range.)

Jaccard, who is currently working on the next IPCC report, said that this small sacrifice over an extended period of time is far better than the alternative.

Flood waters breach the Gatineau River and flood the neighbourhood in Gatineau, Que., in May 2017. More extreme weather is one consequence of climate change. (Sean Kilpatrick/CP)

“It’s a slight difference in economic output over a 30-year period in order to prevent the dramatic crashing in your economy because of wildfires, acidified oceans, rising seas, major storms and pandemics that can happen from climate change,” he said.

Drummond agrees, noting that concerns about emissions reductions harming the economy will likely always be around, even if they are without merit.

Canada is already on the right path, he said, and the country can ramp up its efforts to see both economic growth and a notable reduction in emissions.

“It’s not like we’re asking to do something that’s never been done before. We are doing it right now, we’re just not doing it enough,” he said. “If you asked me to move a three-tonne rock, if I can move it an inch, I’m pretty sure I can move it a foot.”

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Trudeau to offer premiers billions to help reopen the economy safely – EverythingGP

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Trudeau is offering to transfer the money to provincial and territorial governments, provided they agree to spend it on a number of areas the federal government considers necessary to reduce the risk of a second surge of the deadly coronavirus.

They include testing, contact tracing, personal protective equipment, bolstering municipalities, helping the most vulnerable Canadians and strengthening the health care system, possibly including improving conditions in long-term care homes linked to more than 80 per cent of the deaths in Canada so far.

Making a difference in just one of those areas — municipalities — is a pricey proposition. The Federation of Canadian Municipalities estimates communities across the country, which have been on the front lines of the pandemic, need $10-15 billion to make up for the loss of revenue resulting from reduced transit fares, user fees and deferred property taxes.

At the start of the pandemic, the federal government boosted transfer payments to provinces and territories for health care by $500 million — an amount that seemed large at the time but which has since paled in comparison with the more than $150 billion Ottawa has shovelled into direct financial aid to Canadians and economic stimulus measures.

While Trudeau is now offering provinces and territories substantially more money, there is likely to be some push back from some premiers over his attempt to direct the general areas on which it should be spent rather than letting them spend it as they see fit.

The prime minister is also expected to announce financial support for nearly four million disabled Canadians, who already faced some of the highest costs of living before the pandemic made daily life even more expensive.

Among other things, the pandemic has resulted in many people with disabilities having to rely on in-home care, pay delivery fees for groceries and other items, and fork out higher dispensing fees for prescription drugs.

This report by The Canadian Press was first published June 5, 2020.

The Canadian Press

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Trudeau to offer premiers billions to help reopen the economy safely – CP24 Toronto's Breaking News

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OTTAWA – Prime Minister Justin Trudeau is to offer premiers billions in federal funding to help them safely reopen provincial and territorial economies without triggering an explosive second wave of COVID-19 cases.

Trudeau is expected to present the offer to premiers during their weekly conference call today — the twelfth such call since the pandemic sent the country into lockdown in mid-March.

Precise details, including how to allocate each province’s share of the cash, are to be negotiated in the coming days, but federal officials hope agreements can be reached quickly to get the money flowing fast.

The offer comes with some strings attached, according to federal officials who spoke on condition of anonymity because they were not authorized to discuss it publicly.

Trudeau is offering to transfer the money to provincial and territorial governments, provided they agree to spend it on a number of areas the federal government considers necessary to reduce the risk of a second surge of the deadly coronavirus.

They include testing, contact tracing, personal protective equipment, bolstering municipalities, helping the most vulnerable Canadians and strengthening the health care system, possibly including improving conditions in long-term care homes linked to more than 80 per cent of the deaths in Canada so far.

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