(OTTAWA) Amid turmoil that could push Canada’s economy into recession in 2023, Finance Minister Chrystia Freeland is proposing a series of targeted measures to support low-income workers, students and small businesses. The goal: to give a financial boost to those hard hit by the rising cost of living without fueling inflation.
Posted at 4:09 p.m.
In her economic statement released Thursday, Minister Freeland uses some of the unforeseen windfall in the last budget due to higher commodity prices and higher inflation (around $30 billion) to boost the Canada Workers Benefit and permanently eliminating the federal portion of interest on all student and apprentice loans, among other measures.
Despite the uncertainty hanging over the global economy and market volatility, Ottawa is forecasting a lower-than-expected deficit in 2022-2023, or $36.4 billion instead of $52 billion in the budget tabled in April. The shortfall is expected to be $30.6 billion in 2023-24 and $25.4 billion in the following fiscal year. The return to balanced budgets is expected in 2027-2028 (surplus of $4.5 billion).
“Canada cannot avoid the global slowdown. Nor could we have prevented COVID-19 from reaching our shores once it started spreading around the world. But we will be ready. In fact, we are ready,” said Mr.me Freeland in a speech to the House of Commons.
In the case of the Canada Workers Benefit, the Trudeau government wants to issue advance payments to the approximately three million low-income workers who have been entitled to it since 2021 instead of paying them the amount when they complete their tax return . This measure, distributed in the form of three advance payments, will offer a total of up to $714 for single workers and $1,231 for a family.
With respect to student loans, the Trudeau government had already announced the suspension of interest charges for two years in 2021. This measure was to end on March 31, 2023. Ottawa is now opting to permanently eliminate interest charges. interest from that date – financial relief for students that will cost the tax authorities about $550 million a year.
Small businesses will eventually get a reduction in credit card transaction costs. This reduction will either be negotiated with the credit card companies or imposed by legislation by next year.
“We’re working to lower credit card fees so small businesses don’t have to choose between squeezing their already tight margins and passing the fees on to their consumers,” Ms.me Freeland.
To these assistance measures must also be added those already announced in recent weeks to help low-income families cope with the rising cost of living, namely the doubling of the GST tax credit over the next six months ($2.475 billion), the tax-free Canada Housing Benefit supplement of $500 ($1.1 billion) and the new national dental program.
In the economic statement, the Trudeau government is setting aside $1.3 billion to rebuild parts of the Atlantic provinces and eastern Quebec that were devastated by Hurricane Fiona in September.
Following in the footsteps of the Biden administration in Washington, Minister Freeland also plans to impose a 2% corporate tax that will apply to the net value of all types of share buybacks by public companies in the country. Details of this tax will be announced in the next federal budget, due in February or March. The tax, which is expected to bring in some $500 million a year, will come into effect on 1er January 2024.
And to speed up the assessment and approval of major projects, Chrystia Freeland is proposing to pay an additional $1.3 billion over six years to the Impact Assessment Agency of Canada, the Régie de l’énergie of Canada, the Canadian Nuclear Safety Commission and ten other federal departments.
In her economic statement, the Minister of Finance confirms that the Canadian economy will experience “a period of anemic economic growth”. In her last budget presented in April, the Minister expected growth of 3.1% in 2023. This rate is significantly revised downwards six months later. A slow growth rate of 0.7% is now expected. During a briefing, a senior official indicated that Canada will go through “a shallow and short recession” next year.
The unemployment rate is expected to increase from 5.4% in 2022 to 6.1% in 2023. But the increase in the unemployment rate will be significantly lower than the one experienced by the country following the financial crisis of 2008 when it reached 8.7% in June 2009.
As for inflation, it exceeds the forecasts contained in the last budget. If we forecast six months ago an inflation rate of 3.9% for the current year, we estimate that it will average 6.8%. A little respite is expected in 2023. Inflation should be reduced to 3.5%. But this is an upward revision compared to the last budget when we bet on a rate of 2.4%. A return to normal (2.1%) is expected in 2024.