OTTAWA — Finance Minister Bill Morneau laid out a sweeping $27-billion aid package on Wednesday, part of an effort to shield families and businesses from economic fallout amid the growing COVID-19 pandemic.
The aid package, which came alongside another $55 billion in tax deferrals and low-interest loans, is the first of several measures set to be announced by the Liberal government in a bid to lessen the blow from the virus, which has pummeled global markets and brought the Canadian economy to a screeching halt.
The measures included expanding eligibility criteria for employment insurance, a temporary boost in monthly payments of the Canada Child Benefit, and a one-time GST tax credit for low-income families, among other things. The policies come as part of a joint effort by the Bank of Canada and private lenders in recent days, which have slashed interest rates and deferred mortgage payments for struggling households to cushion against the coming downturn.
Observers broadly applauded the aid package on Wednesday, but the head of Canada’s small business coalition said the “underwhelming” measures don’t go far enough to stem job losses.
Morneau detailed plans to cover 10 per cent of payroll costs for small companies, up to a maximum of $25,000 per firm. But Dan Kelly, head of the Canadian Federation of Independent Business, said that number will have to get much higher in order to stave off widespread layoffs, which are expected to come soon as small businesses are forced to shut their doors amid the COVID-19 outbreak.
Higher unemployment levels will in turn crimp the potential recovery once the virus is contained, he said.
“If we have severed the links between employers and a whole bunch of employees, it’s going to take way longer to get back to full steam. And we need to make sure that we can do that almost immediately.”
Several European countries have introduced wage subsidies closer to 75 per cent, which Kelly said would still represent a significant 25 per cent cost for firms whose cash flows have evaporated. Several provinces have declared a state of emergency due to the COVID-19 outbreak in recent days, shutting down schools, restaurants and public venues, in turn obliterating cash flows for thousands of small companies.
Dan Kelly, President of the Canadian Federation of Independent Business.
Chris Young/The Canadian Press/File
“I think the government is struggling to get its head around the fact that the economic effects are likely far greater as a result of self-isolation of Canadians, rather then the specific health effects,” Kelly said.
Perrin Beatty, head of the Canadian Chamber of Commerce, applauded the aid package on Wednesday, saying it would provide much-needed support to struggling firms in a timely manner.
“The most important thing right now is speed,” Beatty said in an interview.
The spending plan kicked off a broader debate on Wednesday over how the Liberal government should have structured its emergency fiscal response, and whether it will allow capital to flow to companies fast enough.
While some observers criticized the 10 per cent threshold on wage subsidies, others said such policies could quickly get unwieldy.
“It’s very, very expensive—can you imagine the government of Canada paying 75 per cent of the salaries of all those people that were laid off?” said Yves Giroux, Ottawa’s Parliamentary Budget Officer.
“I don’t see anyway where you could keep all the people employed, preventing job losses, when you have restaurants, airlines and other firms shutting down,” he said.
The economic effects are likely far greater as a result of self-isolation of Canadians, rather then the specific health effects
Morneau on Wednesday said the government would be announcing further measures in coming days, and said “nothing is off the table” in terms of policy.
“We are going to continue to consider the emerging evidence of these challenges,” Morneau said Wednesday, in response to questions about the level of wage subsidies.
With such a large chunk of Canada’s population in self-isolation, the policy debate played out in real time on social media among academics and policy wonks. There was general support for the aid package, although some experts were concerned that it was not sufficiently large or that the money won’t flow quickly enough.
One way around that problem would be for the government to focus on keeping businesses solvent by deferring a bundle of payments they would normally be making. The government can do things on the policy front, but it can also stop doing things that might be detrimental, wrote Mike Moffatt, an assistant professor at the Ivey Business School.
“An obvious policy here is simply to allow businesses a delay in remitting the HST (and) EI they normally would,” said Moffatt. “This doesn’t change their balance sheet any. They’d still need to pay it eventually but it increases solvency.”
Using existing programs, especially if people have direct deposit set up, could be quicker than sending out cheques, argued University of British Columbia economist Kevin Milligan.
I’m worried that the measures announced will take time
After some quick calculations, Milligan said he estimates that the government is expecting 1.5 million recipients for the Emergency Care Benefit, for workers who don’t qualify for the employment insurance sick leave.
Because those benefits use the employment insurance program, people will have to fill in an application to get it. That could slow everything down, argued Ken Boessenkool, an economist and long-time Conservative policy researcher.
“Now is not normal and I’m worried that the measures announced will take time and increase person-to-person interaction,” said Boessenkool.
These application-based programs are a good way, in normal circumstances, to make sure people properly qualify for the programs. But in the midst of a global pandemic, the government is being urged to err on the side giving out too much money, rather than being stingy.
“Normally, we focus on negative incentive effects: we worry that people might choose not to work if benefits are ‘too easy’,” said Milligan. “Here, in a pandemic too easy is a feature not a bug. This is bizarro-world, but here we are.”
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
Dollarama Inc.’s food aisles may have expanded far beyond sweet treats or piles of gum by the checkout counter in recent years, but its chief executive maintains his company is “not in the grocery business,” even if it’s keeping an eye on the sector.
“It’s just one small part of our store,” Neil Rossy told analysts on a Wednesday call, where he was questioned about the company’s food merchandise and rivals playing in the same space.
“We will keep an eye on all retailers — like all retailers keep an eye on us — to make sure that we’re competitive and we understand what’s out there.”
Over the last decade and as consumers have more recently sought deals, Dollarama’s food merchandise has expanded to include bread and pantry staples like cereal, rice and pasta sold at prices on par or below supermarkets.
However, the competition in the discount segment of the market Dollarama operates in intensified recently when the country’s biggest grocery chain began piloting a new ultra-discount store.
The No Name stores being tested by Loblaw Cos. Ltd. in Windsor, St. Catharines and Brockville, Ont., are billed as 20 per cent cheaper than discount retail competitors including No Frills. The grocery giant is able to offer such cost savings by relying on a smaller store footprint, fewer chilled products and a hearty range of No Name merchandise.
Though Rossy brushed off notions that his company is a supermarket challenger, grocers aren’t off his radar.
“All retailers in Canada are realistic about the fact that everyone is everyone’s competition on any given item or category,” he said.
Rossy declined to reveal how much of the chain’s sales would overlap with Loblaw or the food category, arguing the vast variety of items Dollarama sells is its strength rather than its grocery products alone.
“What makes Dollarama Dollarama is a very wide assortment of different departments that somewhat represent the old five-and-dime local convenience store,” he said.
The breadth of Dollarama’s offerings helped carry the company to a second-quarter profit of $285.9 million, up from $245.8 million in the same quarter last year as its sales rose 7.4 per cent.
The retailer said Wednesday the profit amounted to $1.02 per diluted share for the 13-week period ended July 28, up from 86 cents per diluted share a year earlier.
The period the quarter covers includes the start of summer, when Rossy said the weather was “terrible.”
“The weather got slightly better towards the end of the summer and our sales certainly increased, but not enough to make up for the season’s horrible start,” he said.
Sales totalled $1.56 billion for the quarter, up from $1.46 billion in the same quarter last year.
Comparable store sales, a key metric for retailers, increased 4.7 per cent, while the average transaction was down2.2 per cent and traffic was up seven per cent, RBC analyst Irene Nattel pointed out.
She told investors in a note that the numbers reflect “solid demand as cautious consumers focus on core consumables and everyday essentials.”
Analysts have attributed such behaviour to interest rates that have been slow to drop and high prices of key consumer goods, which are weighing on household budgets.
To cope, many Canadians have spent more time seeking deals, trading down to more affordable brands and forgoing small luxuries they would treat themselves to in better economic times.
“When people feel squeezed, they tend to shy away from discretionary, focus on the basics,” Rossy said. “When people are feeling good about their wallet, they tend to be more lax about the basics and more willing to spend on discretionary.”
The current economic situation has drawn in not just the average Canadian looking to save a buck or two, but also wealthier consumers.
“When the entire economy is feeling slightly squeezed, we get more consumers who might not have to or want to shop at a Dollarama generally or who enjoy shopping at a Dollarama but have the luxury of not having to worry about the price in some other store that they happen to be standing in that has those goods,” Rossy said.
“Well, when times are tougher, they’ll consider the extra five minutes to go to the store next door.”
This report by The Canadian Press was first published Sept. 11, 2024.
TORONTO – The U.S. Consumer Financial Protection Bureau has ordered TD Bank Group to pay US$28 million for repeatedly sharing inaccurate, negative information about its customers to consumer reporting companies.
The agency says TD has to pay US$7.76 million in total to tens of thousands of victims of its illegal actions, along with a US$20 million civil penalty.
It says TD shared information that contained systemic errors about credit card and bank deposit accounts to consumer reporting companies, which can include credit reports as well as screening reports for tenants and employees and other background checks.
CFPB director Rohit Chopra says in a statement that TD threatened the consumer reports of customers with fraudulent information then “barely lifted a finger to fix it,” and that regulators will need to “focus major attention” on TD Bank to change its course.
TD says in a statement it self-identified these issues and proactively worked to improve its practices, and that it is committed to delivering on its responsibilities to its customers.
The bank also faces scrutiny in the U.S. over its anti-money laundering program where it expects to pay more than US$3 billion in monetary penalties to resolve.
This report by The Canadian Press was first published Sept. 11, 2024.
