Canada to spend its way out of recession
Rolls out US$81bn spending plan
Canada’s finance minister announced C$101.4 billion (US$80.9 billion) in spending on Monday to help its battered economy recover from the Covid-19 pandemic and set a greener course with a new climate target.
The measures in the government’s first full fiscal plan in two years are to be rolled out over the coming years.
“This budget is about finishing the fight against Covid,” Finance Minister Chrystia Freeland said in a speech to parliament. “It’s about healing the economic wounds left by the Covid recession. And it’s about creating more jobs and prosperity for Canadians in the days — and decades — to come.”
“We must punch our way out of the Covid recession. That means ensuring lost jobs are recovered as swiftly as possible, and hard-hit businesses rebound quickly,” she said.
Freeland said the government would extend wage and rent subsidies and other emergency aid through September to “conquer Covid,” create a new national childcare programme, and “embrace this moment of global transformation to a green, clean economy.”
In the budget are also funds earmarked to support the tourism sector, indigenous peoples and Black entrepreneurs, as well as to build domestic vaccine production facilities and new affordable housing to end homelessness.
Students will get a break on interest on their loans, while buyers of high-end cars, yachts and private jets will have to pay a new luxury tax.
One of the single largest line items in the budget is C$17.6 billion put aside to help companies cut their CO2 emissions, roll out carbon capture and storage technologies and switch to hydrogen fuel.
The budget also sets out an accelerated plan to cut Canada’s greenhouse gas emissions, and unveils a new target for reducing emissions by 36% from 2005 levels by 2030 — ahead of a virtual Earth Day summit tomorrow hosted by US President Joe Biden.
Canada entered the pandemic in a strong fiscal position relative to other G7 nations after decades of belt-tightening, allowing it to dole out hundreds of billions of dollars in Covid-19 emergency aid.
Critics have warned against piling on too much debt, after Ottawa’s budget deficit exploded over the past year to C$354.2 billion — below prior estimates, but up tenfold from 2019.
“In today’s low interest rate environment, not only can we afford these investments, it would be short-sighted of us not to make them,” Freeland shot back, reviving a pre-pandemic commitment to create one million new jobs within one year.
The budget deficit is forecast to fall to C$154.7 billion in 2021-22, before tumbling over the next four years to C$30.7 billion.
Ottawa’s debt, meanwhile, is set to soar to a record C$1.2 trillion in 2021-22, with a peak debt-to-GDP ratio of 51.2% that would fall to 49.2% by 2025-2026, from an average 31% prior to pandemic.
Private sector economists surveyed by the government forecast Canada’s economy will grow 5.8% this year and 4% in 2022 (both figures were revised upward), after contracting 5.4% last year, when Canada experienced the “steepest and fastest” economic plunge since the Great Depression.