Trudeau Unveils Fiscal Jolt Worth 3% of Canada’s Economy
Trudeau Plans Virus Support Worth 1% of Canada’s Economy
(Bloomberg) -- Prime Minister Justin Trudeau announced plans to roll out a fiscal package worth 3% of Canada’s economy as it grapples with fallout from the coronavirus pandemic.
The measures will be worth a combined C$82 billion ($56.7 billion), Trudeau said Wednesday in Ottawa. This includes C$27 billion in direct support for individuals and companies and C$55 billion in temporary tax deferrals for both households and businesses.
It’s a significant escalation in Canada’s stimulus package, and the urgency appears to be ramping up by the hour. Late Tuesday night, government officials were only talking about the direct stimulus aspect of the plan.
The outlook, however, seems to be deteriorating quickly. The price of Canadian heavy crude slumped Wednesday below $10 a barrel for the first time after oil-sands producers were forced to delay maintenance, pushing more oil into the market at the worst possible time.
“Right now we are focused on making sure that people who are not getting an income or revenue because of this Covid-19 challenge have the money to be able to pay for groceries, pay their rent, and support their families through this difficult time,” Trudeau said.
At a separate press conference, Finance Minister Bill Morneau called Wednesday’s measures the “first phase” of the response and said the government is prepared to do more if needed.
“I will do whatever it takes,” he said. “There will be more to come.”
More on Canada’s Virus Response
Global financial markets are continuing to slide as the economic fallout from the pandemic outpaces even the massive response from governments and central banks.
Trudeau also confirmed an announcement earlier by President Donald Trump that Canada and the U.S. have agreed to close the world’s longest undefended border to all non-essential traffic.
The measures announced Wednesday include steps to bolster child benefit payments, a C$10 billion emergency care program to workers who stay home and don’t have access to paid sick leave, and a 10% wage subsidy to eligible small businesses for the next 90 days. The bulk of the support is a plan to allow taxpayers to defer filing until after Aug. 31 -- a temporary liquidity support.
Wednesday’s package brings the support offered to businesses and individuals to more than C$500 billion during the crisis, the prime minister’s office said in a statement. The country’s banking regulator is loosening capital requirements to free up C$300 billion of lending capacity, while the country’s housing agency is buying up to C$50 billions in mortgages to provide liquidity.
Bank of Canada Governor Stephen Poloz, who was also at the Morneau press conference, has cut interest rates by a full percentage over the past two weeks and moved aggressively to keep money flowing through credit markets. Investors are anticipating another half percentage point cut in coming weeks.
Asked why he hasn’t moved since the Federal Reserve slashed interest rates on Sunday, Poloz said he would like the “benefit of analysis” of the recent fiscal steps and other measures taken by the central bank before deciding on the next steps. The next rate decision is scheduled for April 15.
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