Recognizing the challenges faced by businesses and workers in the face of the COVID-19 response and uncertainty in the global economy, the federal government announced a combined $82 billion support package for the Canadian economy – more than 3% of Canada’s GDP.
The latest package includes $27 billion in direct support to individuals, families, and businesses, plus an additional $55 billion in liquidity measures for the economy, through the deferral of tax revenue.
These are big-ticket items, as big as it gets. The government has aimed its relief program mainly at individuals, via tax deferral and transfer payments, adding business supports here and there, with more expected to follow. In both public policy terms and political ones, this is probably the most practical move, the government is focusing on how individual Canadians will be impacted in the immediate term rather than on employers or the mechanics of the market.
Today’s package comes as Canada and the United States announced that they will temporarily restrict all non-essential travel across the border – that is, travel for recreation or tourism purposes. Prime Minister Trudeau was firm in messaging that travel measures will not apply to commerce or trade and in a later press conference, Public Safety Minister Bill Blair noted that the supply chains between both countries remain secure. The regulations are still being finalized, but there is reason to believe Canadians currently in the United States will be allowed to return to Canada and Americans in Canada to the United States, but any travel for recreation or tourism purposes will not be allowed.
The overall package of measures is intended to prepare the economy to rebound after the COVID-19 threat passes. However, the Prime Minister noted that today’s announcement is a significant step, but the government is prepared to do more if needed, in coordination and collaboration with the provinces and territories, international counterparts, and with Indigenous leaders.
Finance Minister Bill Morneau echoed that this was the first phase of support and committed to a financial rescue package for the oil and gas sector, which will include a plan to address orphan wells, to be announced in the coming days. Similarly, bridge financing is also being considered for the air transportation sector. The government is still considering options for other hard-hit sectors, such as tourism and retail.
A common theme of today’s announcement is that there is still a high level of uncertainty and unknowns about the current situation. Both Minister Morneau and Governor Poloz acknowledged that despite the unknowns, the strength of the Canadian economy and banking system provide the ability to be nimble and adaptable on fiscal policy to prepare for potential outcomes.
Questions for another day include whether the government will ever be able to return to platform commitments that were made six months ago, given finite fiscal room.
A number of the measures – totaling approximately $23 billion of the $27 billion in direct spending announced today will require Parliament to pass this legislation in order to implement. Minister Morneau will be tabling emergency legislation to provide timely support and ensure the government has the tools necessary to respond as the situation evolves.
Calling on all parties and the Senate to support the legislation without delay, Minister Morneau expressed his confidence that all parliamentarians would rise to the occasion during these challenging times. While a specific time for Parliament’s temporary return was not revealed, Morneau expected it “very quickly.”
Prime Minister Trudeau also noted that Government House Leader Pablo Rodriguez was negotiating with opposition parties on how to recall Parliament for swift passage of these measures. This afternoon, Rodriguez said that he expected the House of Commons to be recalled next week and he will continue to engage with his counterparts to bring back the House in a responsible way.
Of note, the House of Commons requires a quorum of twenty MPs in order to sit (of 338 MPs), including at least two Ministers to pass legislation. Rodriguez continues work with opposition House Leaders to determine the numbers that will be required to participate to pass the government’s emergency legislation.
It is expected that several of the mechanisms to access supports announced today will be operationalized in the coming days. Where required, legislation must be adopted in order to implement programs.
Several of the new benefits are expected to be available for application in April (such as the new Emergency Care Benefit) or will be administered by the Canada Revenue Agency, while other departments will be working quickly to put programs in place and get funds out the door.
Direct Supports to Canadians Announced Today
- Introduce Emergency Care Benefit for people not eligible for Employment Insurance (EI) sickness benefits, those taking care of a family member who is sick with COVID-19, and parents not earning employment income due to school closures, providing up to $900 biweekly for up to 15 weeks
- Introducing an Emergency Support Benefit to provide up to $5 billion to support workers who are not eligible for EI and who are facing unemployment
- Provide a temporary wage subsidy to employees of small businesses equal to 10% of remuneration paid for a period of three months, up to a maximum subsidy of $1,375 per employee and $25,000 per employer, enabling them to keep staff on payroll
- Deferring the income tax filing due date to June 1, 2020 and deferring income tax owed until after August 31, 2020
- Temporary $2 billion boost to the Canada Child Benefit, with the overall increase for families approximately $550/family, on average
- Supplementing the GST credit to offset consumer tax paid by lower income families, doubling the maximum benefit for the 2019-20 tax year
In addition, further measures will see a six-month interest free moratorium on student loans, increased funding to the Reaching Home program to support people experiencing homelessness, as well as women’s shelters and sexual assault centres during the COVID-19 response. To address the needs of First Nations, Inuit, and Metis communities, $305 million will be provided for a new distinctions-based Indigenous Community Support Fund.
Additional Business Measures
In addition to the measures announced last Friday and the announcement of the $50 billion Insured Mortgage Purchase Program on Monday, the Government announced new measures to support business:
- Allowing all businesses to defer, until after August 31, 2020, the payment of any income tax amounts owing
- Export Development Canada will provide $10 billion worth of support to Canadian companies affected by the global situation
- Farm Credit Canada will be boosted to support farmers and food producers
- Additional support measures are anticipated to support vulnerable sectors of the economy through instruments like the Canada Account, which is administered by EDC to support exporters when deemed to be in the national interest
The banking sector has also affirmed its commitment to supporting Canadians and businesses effected by COVID-19. Large banks will provide up to a 6-month payment deferral for mortgages and relief on other credit products.
The Bottom Line
Today’s Economic Response Plan is a big one, the largest (but not last) of the government’s anticipated set of economic measures to fight the COVID-19 crisis. The focus of the plan is on individual relief, with only some business support in today’s package, and further targeted measures to follow.
The government’s plans for holding together a fiscal framework are unclear. With today’s package, the government has used up a lot of its ammunition to provide a COVID-19 response. It is unclear what further measures will be available to the government should the situation deteriorate beyond the scenarios driving today’s package but, as was reiterated throughout the day, the government is prepared to do more if needed in these uncertain times.