On Wednesday, the federal government presented Canada’s 150th Throne Speech, addressing the COVID-19 pandemic and plans to “build back better”. The speech was given by Governor General Julie Payette in Ottawa with very few in-person attendees, and masks and physical distancing measure in place.
The Governor General began by noting the extraordinary times faced by Canadians, as well as their resiliency.
“We don’t decide when hardship comes, but here in Canada, we have decided how we wanted to address it. We have adapted in remarkable ways.
We Canadians did our part. We changed our habits, postponed our plans, switched to teleworking or had to completely reinvent our work, all this, while caring for one another.”
The 2020 Speech from the Throne had “four foundations” which sets the direction for the Federal Government going forward:
- The first foundation of this plan is to fight the pandemic and save lives.
- The second foundation of the Government’s plan is supporting people and businesses through this crisis as long as it lasts, whatever it takes.
- The third foundation is to build back better to create a stronger, more resilient Canada. To do this, we must keep strengthening the middle class and helping people working hard to join it, and continue creating jobs and building long-term competitiveness with clean growth.
- The fourth and final foundation of this plan is to stand up for who we are as Canadians.
Setting the tone for the speech, the Government spoke to their plans to continue to spend, in order to support Canadians.
“This is not the time for austerity. Canada entered this crisis in the best fiscal position of its peers. And the Government is using that fiscal firepower, on things like the Canada Emergency Response Benefit and the Canada Emergency Wage Subsidy (CEWS), so that Canadians, businesses, and our entire economy have the support needed to weather the storm.”
Noteworthy for our members, these were some commitments made for business in the Throne Speech:
- The federal government commits to creating one million jobs. “This will be done by using a range of tools, including direct investments in the social sector and infrastructure, immediate training to quickly skill up workers, and incentives for employers to hire and retain workers.”
- The Canada Emergency Wage Subsidy will be extended until next summer.
- CERB will not be extended, instead, recipients will be supported under the E.I. system. The government will have a “transitional” program called the Canada Recovery Benefit, for those that do not traditionally qualify for EI.
- “The Government will launch a new fund to attract investments in making zero-emissions products and cut the corporate tax rate in half for these companies to create jobs and make Canada a world leader in clean technology. “
- The government also committed support for “manufacturing, natural resource, and energy sectors as they work to transform to meet a net zero future, creating good-paying and long-lasting jobs”
The Prime Minister provided a follow-up to the Throne Speech in an evening address to the nation. Justin Trudeau spoke further to the current COVID-19 situation and the government’s plans for recovery. Trudeau declared that Canada “is at a crossroads”, and that Canadians must be vigilant in facing the coronavirus this fall. One noteworthy moment to highlight on business was mention of the strengthened EI system, of the extension of the Canada Emergency Wage Subsidy, and expansion of the Canada Emergency Business Account:
“We will continue to support all those who need it with a strengthened and broadened employment insurance system. Maybe your boss was able to keep you on the job or hire you back because the Emergency Wage Subsidy helped with the payroll. People still need this program, so we’re extending it right through to next summer. Or perhaps you’re a business owner needing extra help to bridge to better times. For you, among other measures, we’re expanding the Canada Emergency Business Account. And there also more we’re going to do. Go to Canada.ca/coronavirus to see what support is available right now and how it will apply.”
The Chamber has looked to Canadian history and world events from an economic perspective for some context on the events unfolding today, and two basic observations came to light on how to approach major global challenges.
At the start of the Great Depression in 1929, our research shows that an austerity program was enacted under the leadership of Prime Minister Mackenzie King, who refused large spending aid in the face of the economic calamity. R.B. Bennett, who succeeded the King Government in 1930, also held back on massive aid for a while, before changing course, but by then it was too late to change the tide. As a result, Canada’s economy recovered slowly, and did not see a proper recovery until another world war boosted the economy out of depression.
Another historic economic challenge that Canada faced was during the extremely high debt levels of WW2 and just following. During this time, debt-to-GDP levels shot to over 100%, dwarfing the still relatively high 49.1% debt-to-GDP ratio that is projected for 2020-21. To fight the fiscal crisis then, the federal government had begun a deficit spending program in 1943, that, six years later, had grown the national debt three times over. However, the increased spending seems to have stimulated the economy well, because by 1956, ten years after reaching a staggering 109% debt-to-GDP level, the ratio had decreased to only 35%.
Canada appears to be taking a high spending strategy similar to what they pursed following World War 2 debts to tackle the current economic crisis. The issue at hand with this strategy, as pointed out by The Globe and Mail, is that many of the factors that allowed debt to be reduced quickly during those times are not the same today. During those times manufacturing was soaring, free trade was expanding, tax rates on both individuals and corporations were comparatively higher, and per capita, real spending was kept in check. The key similarity between now and during post-WW2 times is something that Prime Minister Trudeau stressed during the prime time address: low interest rates. Prime Minister Trudeau stated:
“I know some people are asking how we can afford to do all this for Canadians. That’s fair. The low interest rates mean we can afford it. And in fact, doing less would end up costing far more. Doing less would mean a slower recovery and bigger deficits in the long run. While we’re dealing with this pandemic, I don’t want you or your parent or your friend to take on debt that your government can better shoulder. So, yes, in the short term, we’ll keep investing. But beyond the emergency, as we start to build back better, we must do that in a fiscally and sustainable way. Investing for a recovery must be done responsibly.”
During the July ‘fiscal snapshot’, the Government stated that debt costs would be $4 billion lower than its December forecast, despite adding hundreds of billions of dollars in further spending due to the lower interest rates. For the time being, the government sees this as an opportunity to borrow heavily and take advantage of lower debt servicing costs than average, to try to spend their way out of these tough times. What remains to be seen is the long term fallout of a high spending response, and how long these low interest rates will last.
President and CEO of the Canadian Chamber of Commerce Perrin Beatty responded to the Throne Speech and the increasing debt by saying:
“… the Canadian Chamber has significant concerns about the debt levels that Canadians will be burdened with for decades to come, without a plan as yet for how to pay for it. Making sure Canadians were supported during the pandemic was necessary and right, but we must move from an economy that is based on subsidies to one where families and businesses can be self-sufficient again and where we don’t burden future generations with a crushing debt load. Today’s speech was a beginning, but much more needs to be done to help the more than one million Canadians who lost their jobs get safely back to work. The most direct and efficient route to do so is to enable the only group that can create jobs: Canadian businesses. Managing the pandemic and safely reopening our economy as soon as possible remains our most urgent need.”
On Thursday, Premier Jason Kenney responded further to the Throne Speech dismayed by the lack of focus on Albertan interests in the Throne Speech, and asserting that the Federal government’s priorities will harm Alberta’s energy industry:
“A strong Canada needs a strong Alberta and Alberta was not recognized in yesterday’s throne speech with (only) one passing reference about effectively phasing out the energy sector”
“All we are asking of the Government of Canada is to let this province, and our resource industries, to get off their knees and get back onto our feet during the largest economic contraction since the Great Depression”.
You can read or watch Premier Kenney’s full response to the Throne Speech on the Alberta website.
We will continue to monitor this as parliment resumes as many of the policies mentioned in throne speechs have not been fully developed at this time. We at the Sherwood Park & District Chamber of Commerce understand that these have been very difficult times for business. For more information on how we can help provide support for your business or to become a member, visit www.sherwoodparkchamber.com