Federal Fall Economic Statement: Economic Recovery, Climate Action, and Reconciliation
Finance Minister and Deputy Prime Minister Chrystia Freeland’s second Fall Economic Statement (FES) focused on the fight against COVID-19.
As the Omicron variant continues to surge, the FES makes significant commitments on new pandemic spending. Despite this, Minister Freeland ended her speech on a note consistent with the government’s focus this year on core Liberal Party issues like climate change, Indigenous reconciliation, and the economy.
At the same time Minister Freeland was updating Canadians on the economy, sources were saying the government wants to bring back its advisory against non-essential travel. Health Minister Jean-Yves Duclos said in Question Period on Tuesday, “Now is not the time to travel. We must follow public health measures, get vaccinated, get boosters whenever they are available.” The government is also considering expanding a limit on foreign nationals entering Canada beyond the 10 African countries already banned early in the Omicron spread.
Fiscal State of the Nation
Highlights from the fiscal snapshot include:
- A $25.1 billion surplus in Canada’s balance of trade in October
- Household employment income reaching seven per cent above pre-pandemic levels
- Recovery of the roughly three million jobs lost because of the pandemic
- Canada on track to reach its pre-crisis GDP five months quicker than after the 2008 recession
- Deficit of $327.7 billion for the last fiscal year and $144.5 billion for this fiscal year
- Debt-to-GDP ratio in FY 2020-21 was 47.5 per cent. It is forecast to peak at 48.0 per cent in FY 2021-22 and then decrease steadily
The Plan to Address Inflation, Cost of Living Increases, and to Support Workers
The FES features a series of measures meant to address the rising cost of living and support workers in sectors still significantly affected by the pandemic. The announcement of these measures was accompanied by an acknowledgement that the government is “mindful of elevated inflation and its impact on the cost of living for Canadians” as well as an explanation that “inflation is a global phenomenon driven by the unprecedented challenge of re-opening the world’s economy.”
These comments are intended to fend off attacks from the Conservatives and NDP, who see these issues as an easy line of attack to criticize the government. However, the measures announced position the Liberals as active on economic recovery and supportive of workers and industries that need it most. Commitments include:
- Providing debt relief to students who need to repay the Canada Emergency Response Benefits they were not eligible for by proposing to offset their debt with the Canada Emergency Student Benefit amount for which they were eligible
- Extending small businesses’ deadline for the repayment of Canada Emergency Business Account loans
- Ensuring that seasonal workers who received pandemic benefits can still qualify for the EI Seasonal Workers Pilot Project
- Extending the Canada Recovery Hiring Program until May 7, 2022
- Establishing the $60 million Canada Performing Arts Workers Resilience Fund
Congestion in Canadian supply chains is another key factor driving up the cost of goods, which will especially hit Canadians as they do their holiday shopping. To disentangle the supply chain, the Liberals committed $50 million under the National Trade Corridors Fund to assist Canadian ports with the acquisition of cargo storage capacity and other measures to relieve congestion.
Climate Change Initiatives
As expected, climate change featured prominently in the FES. The impact of this summer’s droughts on Canada’s agriculture sector, paired with landslides and flooding in BC tragically destroying homes and critical infrastructure, served as examples the government used to illustrate the relationship between climate change and Canada’s economic wellbeing, as well as the importance of taking immediate action against climate change.
Drawing these connections helps set the stage for the government’s accelerated climate agenda. Climate commitments include plans to support cities, businesses, infrastructure, and Canada’s country-wide supply chains. Measures announced in support of climate initiatives include:
- Returning the proceeds from the Direct Fuel Charge to provinces and small and medium-sized businesses
- Finalizing the National Adaptation Strategy by the end of 2022
- Publishing the government’s Green Bond framework in the final quarter of FY 2021-22
Minister Freeland emphasized the government’s role in fighting the pandemic and left the door open to future spending measures, referencing the uncertain global economy and the unpredictability of COVID-19. New spending commitments to fight the pandemic include:
- $1.7 billion to procure more than 180 million rapid tests
- $4.5 billion to pay for additional costs of fighting Omicron and other COVID-19 surges
- $37.4 million over three years, starting in 2021-22, to Transport Canada to support the implementation and oversight of the vaccine mandate for federally regulated air, rail, and marine employees and passengers
- Up to $2 billion over two years to support the procurement of COVID-19 therapeutics, and associated logistics and operational costs
One of the key priorities of the FES is a commitment of $20 billion to settle the cases of First Nation children currently before the Canadian Human Rights Tribunal and a pledge of a further $20 billion to improve services going forward.
The issue has been a constant source of attack from the NDP over the summer and into the fall, and the Liberals likely hope this commitment will address some of that criticism. The government also renewed its commitment to provide free rapid COVID-19 tests to Indigenous communities.
Elements of the fiscal update provided an opening for Erin O’Toole and the Official Opposition Conservatives to swiftly criticize the government on the cost-of-living issue, against the backdrop of an inflation rate of more than four per cent and supply chain disruptions driving the cost of goods even higher.
Despite Bank of Canada Governor Tiff Macklem’s renewal this week of a two per cent inflation target, these issues will be challenging for the Trudeau government in the months ahead as the Conservatives will undoubtedly continue to hammer the Liberals on an issue keenly felt by Canadians across the country.
Jagmeet Singh and the NDP were also quick to accuse the Liberals of not helping struggling Canadians. The NDP Leader stated that “instead, [Trudeau] chose to continue giving a free ride to the ultra-rich.”
The NDP emphasized that they will continue to fight for more investment in homes people can afford, helping workers transition into a renewable future, and keeping Canadians safe from COVID-19 variants.