Globe Editorial: What a prudent Liberal federal budget would look like

It’s fiscal season in Ottawa, with the Liberal government already in the fray, trying to shape perceptions of the — er, fiscally prudent — spending plans that will emerge over the next few months.

“There is still a lot of uncertainty in the global economy,” Treasury Secretary Chrystia Freeland told reporters last month. “And that means we must continue to take a fiscally prudent approach.” The Treasury Secretary also acknowledged that it would be unwise for fiscal policy to “fuel the flames of inflation”.

All of this begs the interesting question of what a fiscally prudent Liberal budget might look like — and, more importantly, how fiscally prudent Ottawa might be. should look.

Ms. Freeland’s claim for restraint rests largely on the decline in the ratio of net federal debt to gross domestic product, the government’s perceived fiscal anchor.

The fall economic report predicted marginal improvement, with the debt-to-GDP ratio falling from 42.3% in the current fiscal year to 42.2% in the next fiscal year. But that’s well below the pandemic peak of 49% in fiscal 2021. And that’s enough to meet Ms. Freeland’s goal of reducing the debt burden by the smallest margin.

To put it bluntly: this modest achievement must be very modest. First, the Liberals have received huge revenue streams: $37.5 billion in the current fiscal year, which will grow to $149.1 billion by fiscal year 2027.

The government will spend almost half of this windfall (this figure excludes higher than expected debt servicing costs). Part of this increase results from the inflation indexation of federal benefits and is unavoidable. But the Liberals, as has been the norm since taking office in 2015, chose to use the windfall gains to increase overall spending.

Some of these expenditures were reasonable, including increased support for low-income households battered by rising inflation. But the government could have found savings elsewhere – perhaps a hiring freeze? – who would have compensated for these expenses.

Another approach would have been to pocket most of the new revenue, reallocate some of the existing spending, reduce the deficit, and ease the upward pressure on inflation from fiscal policy. Failure to do so means that monetary policy will have to do much more to control inflation.

Essentially, the Liberals’ reluctance to cut federal spending means Canadian families are having to cut their own budgets in the face of higher interest charges.

Thus, the beginning of a genuine liberal claim to fiscal rectitude would begin with breaking this annoying habit. This would be a particularly promising time as the looming recession could dent the somewhat optimistic fall sales forecast.

This does not mean that the budget should be frozen. Indeed, the Liberals continue to make spending commitments, including phased increases to federal health transfers announced this week.

That brings us to another key test of the Liberals’ self-proclaimed fiscal prudence: the government’s strategic spending review, which aims to identify savings of $6 billion over five years, starting in fiscal year 2025. By FY2027, the government plans to unveil another $3 billion in savings.

The start of this austerity course was not exactly exhilarating. A narrower spending review would have hit its target by finding $3.8 billion in savings from lower-than-expected spending on COVID-19 relief programs for businesses and individuals.

However, these cuts were not part of any specific government measure and came before the announcement of the April spending review (although the Liberals may not have been fully aware of this fact when they initiated their review). Ms. Freeland’s first spending review was a ghost exercise.

The second shouldn’t be. For example, ongoing savings of $3 billion would fund three-quarters of additional federal health transfers in fiscal year 2027.

The bottom line is the bottom line. Will the Liberals stick to the deficit reduction path outlined in the fall economic statement, which would produce a small surplus within five years? Or will they increase spending and force the Bank of Canada to keep interest rates at painful levels for longer?

Once upon a time, the federal Liberals bragged about going into debt so Canadians wouldn’t have to. The 2023 version should read: We’re cutting our expenses so you don’t have to.


#Globe #Editorial #prudent #Liberal #federal #budget

Retirement is more about a financial cushion than a specific lump sum, Sask. says the financial expert

According to a recent BMO Canada survey, Canadians will need an average of $1.7 million to retire in 2023, up from $1.4 million in 2020.

More importantly, Kelly Remple, financial adviser at Remple and Dusyk Financial, said people need to make sure they have a financial cushion to support themselves and their lifestyles, rather than having to strive to have a specific lump sum that may not reflect lifestyles in different parts differently. from the country.

“I think it’s always important to be aware of these national trends, but I would also say that people who live in Vancouver and Toronto often have different ones. [financial] challenges than Saskatchewan’s,” said Remple.

Remple said trends that calculate what people need to retire are difficult to follow because it’s hard to lump people who live thousands of miles apart into the same category.

He also said not everyone will have the same spending habits or debt to pay off.

“I believe it’s more important for your average family to have a clear understanding of your own personal circumstances,” Remple said.

“What’s the right course of action for you is more important than understanding what the average trends are, involving many people living thousands of miles apart.”

The BMO survey found that the average amount held in Registered Retirement Savings Plans (RRSPs) in the Prairies was $138,391. The national average was $144,613.

The survey also revealed that inflation hit a four-decade high of 8.1% in the summer of 2022 and fell to 6.3% in December 2022.

“BMO’s Retirement Study found that 74% of Canadians are concerned about how current economic conditions, particularly inflation and rising prices, will affect their financial health, and 59% believe this affect their confidence in achieving their goals and retirement goals,” a BMO press release said.

According to the survey, 44% of Canadians are confident they will have enough money to retire as planned, but 74% are concerned about the impact of inflation and rising prices on their finances.

“Spend within your means,” Remple said. “If you know the price of everything is going up, you might have a little less disposable income to spend on material things, but at least you’ll sleep better at night knowing you’re not borrowing more in a low-cost environment. higher interest rate.”

Remple has been a financial adviser since 2008 and said 2022 and 2023 were rivals that year due to unpredictability and the difficulty of estimating and forecasting for clients.

“Since 2008, now is the toughest time,” Remple said.

Remple said a big reason was rapidly rising interest rates, which meant clients’ portfolios didn’t have fixed income to back them up when stocks and bonds fell.

“Usually everyone is happy when stocks go up, but that didn’t happen this time around. People didn’t have the fixed income portion of their portfolio to support them in any way. this time.

The BMO poll was conducted between November 4 and November 7, 2022 by Pollara Strategic Insights via an online survey of 1,500 people. The survey error rate is plus or minus 2.5%, 19 out of 20.

With files from The Canadian Press.


#Retirement #financial #cushion #specific #lump #sum #Sask #financial #expert

Here are the best ways Canadians can get a bigger tax refund this year

Tax season is upon us.

If you’re dreading filing your taxes this year, the motivation you might need is the possibility of getting a bigger tax refund.

With inflation and the skyrocketing cost of living, this extra money is needed by the government more than ever.

So how do you increase your tax refund? By lowering your taxable income and reducing as much as possible the tax debt you owe to the government.

That’s where tax deductions and credits come in. With so many choices, navigating what to focus on can seem overwhelming.

Do not worry! Daily Hive spoke with financial planner and paid accountant Ed Rempel about the best ways to maximize your tax return.

First, what information should you have on hand before filing your taxes?

Before deciding which tax deductions and credits you want to claim, Rempel says you need to make sure you have the proper receipts.

Of course, you’ll need the usual T4 and T5 tax returns for your income, but the savings come from deductions and credits that likely won’t come with supporting documentation.

“It’s beneficial for you to collect all deductible expenses and have receipts or receipts for them,” says Rempel. “They should have receipts for donations and medical care, but need to track certain expenses like work-from-home expenses.”

He adds that it’s also helpful to keep track of your carried forward balances or deductions and credits from your last tax return that you haven’t claimed.

“A good number can be claimed in the years to come,” he explained.

Tax credit vs tax deduction

Before we dive into the different types, it helps to understand the difference between a tax credit and a deduction.

Simply put, deductions reduce the taxable portion of your income, while credits reduce taxes owed.

Which guarantees you a bigger tax refund, says Rempel, if your income is over $50,000 a year, tax deductions are your best friend.

“The main difference is that tax deductions reduce your taxes based on your tax bracket, while tax credits reduce your taxes based on the lowest tax bracket, which is around 20% “, he explained.

He gives the example of a person with an annual income of $80,000 who would be in the 30% tax bracket.

“A $10,000 tax deduction lowers your tax by $3,000, while a $10,000 tax credit lowers your tax by $2,000,” he said.

He adds that many state benefits are based on your taxable income. So if you apply for the Canada Child Benefit (CCB) as a parent, you can get a larger refund if you have tax deductions.

The best deductions and credits to maximize your tax return

Contribute to your RRSP

“The higher the income, the better it works,” Rempel said.

For example, if your income is over $162,000, your maximum deposit for 2022 is $29,210. Since you are in the 45% tax bracket, you should get a tax refund of $13,000.

If you’re not sure how much to contribute to your RRSP to get the most bang for your buck, Rempel says it’s based on:

  • RRSP contribution required to reach your retirement goal
  • Contributions required to maximize your life RRSP space
  • How much you can contribute to your current marginal tax bracket
  • Your current RRSP contribution limit (which you can find here)
  • Your available money (or how much you could borrow)

Use this RRSP calculator to estimate the amount of your tax refund.

claim moving expenses

If you got a new job last year and had to move at least 40 km closer to your new place of work, you can deduct all your moving expenses.

Yes, this means you can claim the costs of flights, moving, selling your property, breaking a lease or mortgage and temporary accommodation, which can add up to a lot.

Claim self-employment or homework expenses

If you own your own business and work from home, you can deduct expenses related to working from home. You can also claim car travel expenses, but be sure to keep this information.

If you are not self-employed but still work from home, you can still claim these costs. Last year, eligible employees received up to $500 if they worked from home for 250 days or less.

There are no updates on this franchise this year.

ask for donations

If you donated to many causes this year, you might get some good karma. Rempel says that after the first $200, you can recoup between 40% and 50% of donations each year.

Apply for childcare costs and family allowances

You can deduct child care expenses such as daycare, summer camps, and child care providers such as nannies as a deductible.

As Rempel said, government benefits like CCB are based on your taxable income, so claiming a child care expense deduction could help you get a bigger refund.

claim medical expenses

Don’t throw away your bills and prescriptions for dental exams, no need to buy gluten-free products if you have celiac disease, and insulin pens! Medical expenses like these can be claimed as non-refundable tax credits.

Subtract the interest on the loan to invest

“Borrowing money for investments can be the best long-term wealth-building strategy for the right people if done correctly,” Rempel said.

If you borrow a large sum of money to make investments, the interest can essentially be deductible and earn you a huge refund.

balance brought forward

Didn’t you claim tax deductions or credits from tax year 2021? no perspiration

Rempel says many of them can still be claimed years later.

As an example, he cites RRSP contributions that you were unable to deduct last year. You can factor this into your tax deductions this year for a larger refund.

For college students, Rempel says tuition is capped based on income, so you may have unused credit to claim.

If you are self-employed, you can deduct the cost of working from home based solely on your use of the space to generate business income.

However, Rempel says you can defer this to claim next year’s business income deduction.

Charitable donations are capped at 75% of your income, but can be deferred for up to five years, depending on the financial advisor.

Finally, moving expenses can only be deducted based on your income for that year, but if you started later in the year and didn’t earn enough, you can claim them back. Next year.


#ways #Canadians #bigger #tax #refund #year

Evening update: Laval community struggles after fatal daycare bus crash as PM pays tribute

Good evening, Let’s start with today’s best stories:

Two children injured in an accident in a Quebec daycare center have been released from the hospital

Politicians from across the province and the country converged on the daycare center in Laval, Que., where two children were killed, six others injured and a man charged with first-degree murder in an apparent bus attack yesterday. The leaders expressed their condolences and urged those affected to seek psychiatric treatment.

Two of the six children injured in the crash have been discharged from hospital, while two others are in “favourable” condition, according to Montreal health officials. None of the injuries are considered life threatening.

Pierre Ny St-Amand, a 51-year-old Société de transport de Laval driver, is charged with two counts of first-degree murder and several other counts of aggravated assault, assault and attempted murder.

This is the evening daily update newsletter. If you read this on the web, or receive it as a redirect, you can sign up for Evening Update and over 20 other Globe newsletters Here. If you like what you see, share it with your friends.

The latest developments in the war in Ukraine

Ukrainian President Volodymyr Zelenskyy said today that he had heard at a summit from several European Union leaders that they were ready to make planes available to Kyiv, and indicated that this would be the one of the biggest shifts in the western world’s support for Ukraine.

He gave no details and there was no immediate confirmation from any European country. But his comments came amid signs during a tour of Europe that the countries were set to lift one of the key taboos on military aid to Kiev since Russia invaded last year. .

Meanwhile, the Russian mercenary group Wagner has stopped recruiting prisoners to fight in Ukraine, says its founder Yevgeny Prigozhin.

Public sector unions and Ottawa at odds over double-digit wage demands

The federal government and unionized workers are preparing to accept double-digit wage increases to accommodate rising inflation and remote work rules in a series of heated contract negotiations.

Ottawa is about to start, or is already in the process of negotiating, new collective agreements for almost all the unions representing more than 300,000 federal employees.

The most important and difficult negotiations take place between the Treasury Board and a group of 120,000 workers represented by the Public Service Alliance of Canada (PSAC).

In memory of legendary pop composer Burt Bacharach

The uniquely gifted and popular composer who has delighted millions with his whimsical arrangements and unforgettable melodies Pursue, Do you know the way to San José? and dozens of other hits, died of natural causes at the age of 94.

The Grammy, Oscar and Tony winner had a string of top 10 hits from the 1950s into the 21st century. His music could be heard on everything from movie soundtracks to iPods, whether Raindrops are falling on my head And I say a little prayer Or I will never fall in love again And This guy is in love with you.

Dionne Warwick was his favorite performer, but Bacharach, usually with lyricist Hal David, also created top-notch material for Aretha Franklin, Dusty Springfield, Tom Jones and many others. Elvis Presley, the Beatles and Frank Sinatra were among the countless artists who covered his songs.

Fred Lum/The Globe and Mail


Hopes of additional rescues in Turkey and Syria are fading: Cold, hunger and desperation gripped hundreds of thousands who were left homeless after earthquakes three days ago, while the death toll passed 19,000 today. Here’s how you can help.

Reduced canopy growth: The cannabis company will lay off 800 employees, or about 35% of its workforce, as part of a transformation plan that includes closing its factory in Smith Falls, Ontario, and consolidating some of its cultivation operations.

Spy balloons have targeted dozens of countries, according to the United States: The Chinese balloon shot down by the United States was equipped to collect intelligence signals as part of an extensive military-linked aerial spy program targeting more than 40 countries, the State Department said.

RIP MendelsonJoe: The long-time singer-songwriter, artist and activist has died of complications from medical assistance at the age of 78 after living with Parkinson’s disease for more than five years.


US stock indices ended lower today, erasing earlier gains as Treasury yields rose after a 30-year bond auction went badly, eclipsing strong gains by the giants of the financial sector. company, including Disney and PepsiCo. Falling commodity prices and mixed corporate earnings helped push down Canada’s main stock market index.

The Dow Jones Industrial Average fell 249.13 points, or 0.73%, to 33,699.88, the S&P 500 fell 36.36 points, or 0.88%, to 4,081.50 and the Nasdaq Composite lost 120.94 points, or 1.02% and finished at 11,789.58.

The S&P/TSX Composite Index slid 81.79 points, or 0.4%, to 20,597. The loonie was trading at 74.29 cents US.

Do you have a topical tip you’d like us to review? Email us at [email protected]. Need to share documents securely? reach via SecureDrop.


Why is the boss of Radio-Canada arguing with Pierre Poilievre?

“She mostly comes across as coy and selfish in her defense of a taxpayer-funded institution that has an obligation to serve all Canadians, not just those it chooses to serve.” Konrad Jakabuski

The disaster in Turkey and Syria should be a wake-up call for British Columbia

“You don’t have to be neurotic to know that the Big One could be coming to British Columbia at any time – like right now while I’m typing this sentence at my kitchen table, or right now while you read it at home.” And many of us are ill-prepared. Marsha Lederman

Alberta’s debt could be fully paid off with potentially massive resource revenues

“As global economic and geopolitical risks increase, the financial gains from deleveraging – in the form of lower interest payments – provide welcome insurance where financial assets do not.” Trevor FallenProfessor of Economics, University of Calgary


The deadline to pay a registered pension contribution for the 2022 tax year is just a few weeks away. But if a heavy debt burden prevents you from contributing to an RRSP by March 1, focus on debt rather than saving, advises personal finance columnist Rob Carrick. And if you have money to save, prefer a tax-free savings account to an RRSP. TFSA funds in a high-yield savings account are readily available and are the ideal emergency fund.


Canada’s EV revolution has a problem – not enough skilled workers to support it

A Stellantis employee works inside a Chrysler Pacifica at the Windsor Assembly Plant on January 17, 2023. REBECCA COOK/Reuters

In the city long known as the unemployment capital of Canada, there are too many good jobs to brew.

Just a few years ago, it was uncertain whether the auto sector on which the Ontario border town of Windsor was built – shrunken by the long decline of traditional manufacturing in North America – would even be competitive in the transition. to electric vehicles.

Now, its success in landing major new investment – ​​highlighted by the decision of automotive giant Stellantis NV and LG Energy Solution to partner here for Canada’s first electric vehicle battery plant – has sparked a stir. relative boom. And the demand for employees for this factory and its branches along the supply chain is very high, which the city and region are struggling to meet. Read Adam Radwanski full story.

Evening Update is presented by SR Slobodian. If you wish to receive this newsletter by email every evening of the week, go to Here Log in. If you have any comments, send us one. note.


#Evening #update #Laval #community #struggles #fatal #daycare #bus #crash #pays #tribute

Canada’s emergency wage subsidy ‘really was a blank check for businesses’: Canadians for Tax Fairness

Some of Canada’s biggest companies have received a pandemic grant to keep their employees on the payroll, but a new report reveals that in many cases these big companies have actually cut jobs while lining their pockets shareholders.

These findings, from a report by Canadians for Tax Fairness, should irritate Canadians and underscore the double standard, said NDP Finance Critic Daniel Blaikie. Canadian National Observer in an interview. It is “outrageous” for the federal government that the Canada Revenue Agency (CRA) is “chasing” some people who applied for and received financial assistance through emergency programs like the Canada Response Benefit. emergency (CERB) to repay the money, he added. .

Now the federal government is unwilling to grant any kind of amnesty to low-income people who have CERB debt, Blaikie said.

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“I think it’s a really big difference in how people are treated,” he said. “The richest and most fortunate are treated with kid gloves, while the most desperate and with the least repayment are treated like criminals.”

During the first year of the COVID-19 pandemic, the federal government introduced a number of support programs, some aimed at Canadians – including CERB – and others aimed at businesses, the most significant of which was the Canada Emergency Wage Subsidy (CEWS). . Last May, the CRA notified more than 250,000 Canadians that they were not eligible for the CERB or related benefits and that they had to repay the money received.

Although “wage subsidy” is in the title, the terms for businesses to receive the CEWS were broad and it was “truly a blank check for businesses,” the report said.

Of 74 public companies that avoided paying at least $100 million in taxes, half received funds from the CEWS, Canadians for Tax Fairness found. The vast majority of companies examined in the report have at least one subsidiary in a tax haven, pay dividends to shareholders and engage in share buybacks. More than half of companies reduced their total workforce in 2020 despite the federal subsidy.

The study only looks at the largest public companies that avoid taxes, so these results may be “just the tip of the iceberg,” said report author DT Cochrane, an economist at Canadians for Tax Fairness.

“Most of our criticism is directed at the government for not having the right rules in place to ensure this is not abused and not researching how this money was actually used,” Cochrane said. Canadian National Observer. Going forward, corporate support programs like CEWS should publicly disclose the amount and duration of support, prevent recipients from paying bonuses to executives and shareholders or increasing dividends, have a way to recoup misappropriated funds and to support large companies only on a case-by-case basis. base, the report said.

Of the 37 public companies analyzed by Cochrane, 11 are involved in the oil and gas sector, including Imperial Oil, Enbridge, Suncor, TC Energy and Canadian Natural Resources Ltd.

Some of Canada’s biggest companies have received a pandemic grant to keep their employees on the payroll, but a new report reveals that in many cases these big companies have actually cut jobs while lining their pockets shareholders.

Despite a slump in sales early in the pandemic, these businesses were “extremely profitable,” Cochrane said. Suncor and Imperial Oil more than quadrupled their second-quarter net profits from 2021 to 2022, and Canadian Natural Resources Ltd. more than doubled their net profits over the same period.

“They have the ability to support their employees without accepting these government grants,” Cochrane said.

Blaikie wants the federal government to make it clear which companies received how much money so that accountability can be held.

The report recommends measures to reclaim corporate tax revenue for the common good, including a windfall tax that the NDP has long called for. The federal government has proposed a one-time tax of 15% on profits over $1 billion for big banks and insurers for fiscal year 2021, but there is no indication that a one-off tax is on the horizon in all sectors.

The 2022 Fall Economic Statement also proposed a 2% tax on corporate stock buybacks, which the federal government says would increase federal revenue by about $2.1 billion over five years to from 2023-2024.

Taxing a percentage of what companies report to shareholders is another possible solution proposed in the Canadians for Tax Fairness report. Recommendations also included increasing the corporate tax rate and closing tax loopholes.

It’s no secret that the federal government must invest in a myriad of sectors of the economy to meet Canada’s climate goals; a massive transformation of industries and energy systems is needed to reduce the pollution responsible for global warming.

A just national transition to a low-carbon economy will be “incredibly costly”, Cochrane said. “When you inject money into the economy, it inevitably ends up in company coffers for all sorts of reasons.

“We need a fairer tax system to ensure that the government can invest where it needs to invest.

Natasha Bulowski / Local Journalism Initiative / Canadian National Observer


#Canadas #emergency #wage #subsidy #blank #check #businesses #Canadians #Tax #Fairness

A third of households say they are financially worse off than last year (survey)

OTTAWA — A third of Canadian households say their financial situation has deteriorated over the past year, with lower-income families more likely to say they are worse off, according to a new survey.

According to a Leger survey commissioned by the Association for Canadian Studies, 34% of Canadian households say they are in worse financial health than last year.

The majority of respondents, 58%, said their financial situation was about the same as a year ago.

Nine percent said their financial situation had improved.

Jack Jedwab, president of the Association for Canadian Studies, said the survey’s most striking finding was the unequal challenges Canadians have faced over the past year, with low-income people the most affected.

Among Canadian households earning less than $40,000, 42% said their financial situation had deteriorated. This compares to 25% of households earning $100,000 or more.

“People…in lower income brackets are finding the crisis particularly difficult in terms of the impact of inflation and higher interest rates and so on,” Jedwab said.

High inflation and rising interest rates have put pressure on Canadian finances over the past year. In an effort to rein in rising prices, the Bank of Canada has aggressively raised interest rates eight times in a row since March of last year.

Economists say low-income households are particularly vulnerable to inflation because they save less and have less flexibility in the face of high inflation. This means that higher prices put more pressure on their budgets.

Meanwhile, high-income earners are saving more and weathering the storm more easily.

The survey also found that Quebecers were the least likely to say their financial situation had gotten worse, while respondents from British Columbia were the most likely to say it was getting worse.

Among Quebecers, 22% said they were worse off. In British Columbia, the figure is almost twice as high, with 43% saying their financial situation has deteriorated.

Jedwab said the variety of responses across the country could be related to the housing market and differences in house prices.

Renters were also more likely than owners to report that their financial situation had deteriorated.

The online survey was completed by 1,554 Canadians between January 23-25 ​​and cannot be subject to a margin of error, as online surveys are not considered true random samples.

This report from The Canadian Press was first published on February 7, 2023.

Nojoud Al Mallees, The Canadian Press


#households #financially #worse #year #survey

China’s reopening is a wildcard for Canada, which is clinging to an economic landing, analysts say

OTTAWA/TORONTO, Feb 6 (Reuters) – China’s rapid reopening is expected to boost demand for commodities that Canada produces in abundance and potentially help Canada’s economy stave off a recession as long as it doesn’t also fuel inflation and further interest rate hikes encourage .

Last month, the Bank of Canada raised interest rates to 4.5%, the highest in 15 years, and said the economy would weaken in the first half and could slide into recession. This prompted the central bank to end its most aggressive tightening cycle yet, becoming the first major central bank to do so.

But analysts say a recovery in China’s economy should boost demand for Canada’s key exports, including oil, natural gas, grains, grains and other commodities, making it more likely a long-awaited soft landing for the economy than previously thought.

China, the world’s second-largest economy, lifted many of the weakest restrictions after abruptly abandoning its strict “zero-COVID” policy in December.

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“We really see China rebound accelerating from here with growth, liquidity and anticipated tax expenditures, with the Canadian dollar and Canadian equities the main beneficiaries,” said Joseph Abramson, co-chief investment officer. at Northland Wealth Management.

Traders have been betting on Canadian stocks and the Canadian dollar, dubbed the “base currency”, since news of China’s reopening broke in December. The benchmark stock market (.GSPTSE), which is roughly 30% weighted in energy and mining stocks, is up almost 8%, while the loonie is up 1.8% against the US dollar .

Doug Porter, chief economist at BMO Capital Markets, said China’s reopening is more of a “clearer picture” for Canada than for other countries with fewer commodity exports.

Canada has the world’s third-largest oil reserves, which have risen 17.9% since China began easing restrictions in December, before returning much of those gains.

But soaring oil prices sparked by China’s reopening could fuel inflationary pressures, Bank of Canada Governor Tiff Macklem pointed out in an interview with Reuters last week, amid concerns that interest rates will rise. remain unchanged.

“The biggest near-term risk that could turn things around quickly would be if the rapid reopening of the Chinese economy leads to a spike in global commodity prices and oil prices,” Macklem said.

Meanwhile, the US Federal Reserve, European Central Bank and Bank of England have also set the course for a pause.

Most analysts foresee a more service-oriented recovery in China and do not expect this to lead to a dramatic oil shock.

“If it’s primarily services that are driving the recovery after the easing of restrictions, you may not see this explosive pressure on the cost of oil deployments around the world,” said Derek Holt, head of economics for the United States. financial markets at Scotiabank.

Karl Schamotta, chief market strategist at Corpay, said China’s reopening will help lower global price levels and potentially offset demand destruction if the economy slows.

“But we don’t think Western central banks will be forced to tighten more aggressively in response to another unexpected inflationary shock,” he added.

Reporting by Steve Scherer and Fergal Smith; Edited by Bill Berkrot

Our standards: The Thomson Reuters Trust Principles.


#Chinas #reopening #wildcard #Canada #clinging #economic #landing #analysts

The first summary of the BoC’s deliberations arrives this week. Here’s what you can expect

OTTAWA — The Bank of Canada will release its first summary of proceedings on Wednesday, giving Canadians a glimpse of the reasoning behind the Board of Governors’ decision to raise interest rates last month.

On the recommendation of the International Monetary Fund, the central bank announced in September that it would start publishing summaries about two weeks after a 2023 rate decision to improve transparency.

“I think that’s a good idea. Most major central banks publish some kind of minutes or summary of meetings,” said Douglas Porter, chief economist at BMO.

The Bank of Canada raised interest rates on January 25 to 4.5% for the eighth consecutive time since March. At the time, the central bank indicated that it would suspend any further rate hikes to let the effects of its aggressive rate hike cycle play out.

Wednesday’s summary should shed some light on what the Board of Governors discussed in making this decision.

Providing insight into deliberations is already standard practice at the US Federal Reserve, where meeting minutes are released three weeks after an interest rate decision.

While logs can be insightful, Porter said they weren’t usually market moves, but rather served as a historical record.

The Bank of Canada didn’t say much about what the summaries will look like, revealing the depth and format of Wednesday’s summaries.

But Porter said he did not expect them to match the details offered in the Federal Reserve meeting minutes.

The Board of Governors of the Bank of Canada is responsible for central bank monetary policy and consists of the Governor, Deputy Governor and four Deputy Governors. Unlike the Federal Reserve, where all 12 members vote on interest rate decisions, Board of Governors decisions are based on consensus.

This means that all members of the Board of Governors arrive at the same decision at the end of the deliberations.

With higher borrowing costs, Canadians and businesses are expected to cut spending further in 2023, which will slow the economy and inflation.

Price growth has slowed in recent months, but inflation remains well above the Bank of Canada’s 2% target. In December, the annual inflation rate was 6.3%.

After raising rates by a quarter point last month, the Bank of Canada made it clear that the pause in future rate hikes was conditional, leaving the door open for further hikes if inflation is not mastered.

According to its latest monetary policy report, the central bank expects inflation to slow faster than expected. It projects the annual inflation rate to fall to 3% by mid-2023 and to its target of 2% by 2024.

Central banks around the world have also raised interest rates as countries grapple with high inflation.

Last week, the US Federal Reserve raised interest rates by a quarter point, signaling that further rate hikes are in store. Meanwhile, the European Central Bank announced a half-percentage-point hike in interest rates and said it would hike rates at least one more time.

Porter said the main question he hopes to see answered in the summary is whether the Bank of Canada will suspend rate hikes or plans to do so again.

“It will be interesting to see if they really want to stay away or if this is just some sort of temporary stopover.”

“Perhaps this synopsis could help answer that question a bit.”

This report from The Canadian Press was first published on February 6, 2023.

Nojoud Al Mallees, The Canadian Press


#summary #BoCs #deliberations #arrives #week #Heres #expect

Canada’s Pension Plan CEO John Graham predicts ‘alpha’ investors will outperform over the next decade

John Graham, President and CEO of the Canada Pension Plan Investment Board, speaks during the Annual General Meeting and Convention of the Canadian Chamber of Commerce in Ottawa on October 14, 2022. Sean Kilpatrick/The Canadian Press

With 2023 set to be another volatile year for investors, the managing director of the Canada Pension Plan Investment Board, John Graham, is in a picky mood.

The CEO of the $529 billion pension fund manager sees 2022 – marked by COVID-19 lockdowns, Russia’s invasion of Ukraine, supply chain disruption, high inflation and the rising interest rates – in the rearview mirror.

The new year doesn’t look much easier at first. But in an interview at CPPIB’s Toronto office, Graham predicted that 2023 could mark a shift to a different investment landscape where the pension plan asset manager could leverage its financial clout and its global reach.

He calls it the start of the “alpha decade” – a time when active investors, with the luxury of choice of country, company and asset, should be able to beat benchmarks and to distinguish oneself.

Over the past 20 years, Graham says, investors of all persuasions have largely benefited from a series of tailwinds that have benefited the global economy. These included cheap lending rates, low inflation and, in hindsight, a relatively supportive political environment. Combined, these factors have created a rising tide for investors, and passive investing strategies have grown in popularity.

As each of these factors has reversed, investors are reassessing risk, deals are harder to come by, and financing is not always readily available. Investors are suddenly taking more diverse approaches to allocating their money. And with government bonds offering generous yields for the first time in years, “there are options now,” Graham said.

Canada’s largest pension plans are increasingly investing in offshore wind projects

“We see the next decade as the decade of value creation, the decade of alpha,” he said. “Because of this tailwind, simply harvesting market returns has been a very successful strategy over the past 20 years. And right now it’s all about choosing your spots. It’s about choosing the right regions, the right asset classes and the right stocks.

In the long run, he added, “it actually offers the opportunity to build a bit more interesting portfolio.”

The CPP administers funds for the Canada Pension Plan, the main national pension program for Canadian workers, which has approximately 21 million contributors and beneficiaries. Since its inception in 1997, CPPIB has taken an increasingly active management approach, shifting more of its investments into assets such as real estate, infrastructure and private equity in addition to stocks and bonds. public bonds.

The first six months of CPPIB’s fiscal year were challenging, with assets down 4% to $529 billion as of September 30. This is a better result than some relevant benchmarks, as the sell-offs caused some stock markets to fall by double-digit percentages.

Over the past 10 years, CPPIB has returned an average of 10.1% per year.

Prior to being named chief executive in 2021, Graham led CPPIB’s lending business, which includes private loan investments in businesses that are beginning to feel the effects of rising interest rates. Much has been made of the valuation gap between listed assets, which in many cases have fallen sharply, and private assets, which have been slower to adjust. But Mr Graham said the Office has been ‘fairly disciplined’ in assessing its portfolios against the markets and does not expect deep discounts ‘based on what I see now’.

He also said many businesses are responding well to the higher borrowing costs that come with rising interest rates. “So far we haven’t seen a lot of stress to be honest. Many companies are doing well.

Despite the many challenges rocking the markets, he also listed some positive signals that are boosting investor sentiment: a reopening in China after the draconian COVID-19 lockdowns, a gradual drop in inflation, a relatively warm winter in Europe , easing pressure on energy supplies and a strong start to the year for stock markets.

However, Mr Graham said the economic dynamics shaping the global investment landscape are more complicated than they have been in recent years. “There is now a national security lens, a national interest lens, applied to economic and industrial policy. It’s not just about maximizing profits. There are other factors at play,” Graham said.

In this regard, he said it was particularly important to be “a bit surgical” when it comes to prioritizing countries and knowing how to invest there, including which sectors to focus on. The Office has eight offices outside of Toronto, from New York and London to Hong Kong and Mumbai.

“Our appetite for a particular country comes and goes based on the opportunities we see at this point,” Graham said. “For now, we are quite comfortable with our exposure to emerging markets.”


#Canadas #Pension #Plan #CEO #John #Graham #predicts #alpha #investors #outperform #decade

Treasury Secretary Freeland pledges fiscal prudence to avoid inflation

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Chrystia Freeland urges caution as Canadian economy threatens to slide into recession

Treasury Secretary Chrystia Freeland in Ottawa. Photo by Sean Kilpatrick/Canadian Press Files

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Treasury Secretary Chrystia Freeland said Canada has a “once in a generation” moment to invest in infrastructure that improves health care and helps fight climate change, but stressed she still has to exercise restraint as the economy threatened to slide into a recession.

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Freeland made the comments after meeting with provincial and territorial counterparts in Toronto on Feb. 3. The main topics on the agenda were investing in the green transition and provincial health funding, a long-standing issue that has sometimes caused tension. federal and state governments that have received more attention during the pandemic.

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Freeland acknowledged that the government is walking a very fine line in implementing these programs, arguing the need for very well-targeted support, as governments need to beware of spiraling inflation with too much fiscal stimulus. .

“We are very aware of the uncertainty in the global economy right now: inflation is high and interest rates are high – things are tough for many Canadians,” Freeland told reporters. “At the federal level, it’s a period of real budgetary constraints. We know that one of the most important things the federal government can do to help Canadians today is to recognize our responsibility not to fuel the inflationary fire and force them to raise interest rates.

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Still, Freeland acknowledged his Liberal Party campaigned on promises to spend more on health and the environment, saying “we will honor those commitments.”

Freeland said she presented nothing specific on the health care front and was transparent about budget constraints and pressures on federal government investments.

This comes after the federal government spent more than a year negotiating with the provinces over health transfers. Premiers wanted the federal government to increase provincial funding by $28 billion a year so that Ottawa would pay 35% of health care costs instead of the current 22%.

Healthcare has become a particular concern as hospitals are overwhelmed and continue to deal with ongoing COVID-19 cases. Quebec Finance Minister Eric Girard said many of those talks about transferring health care benefits depend on what the federal government brings to the table when the first ministers meet next week.

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“It’s time to see the numbers and start talking about the numbers and the metrics associated with the numbers,” Girard told reporters. “And as you know, we want health transfers in Canada.

Canada’s green transition and carbon neutralization was a major theme of the federal budget in 2022. The fiscal plan included promises to reduce carbon emissions and expand infrastructure for electric vehicles and renewable energy sources, among others.

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Headline inflation was around 6% in December, an improvement from the summer but still much faster than the Bank of Canada’s 2% target.

Bank of Canada Governor Tiff Macklem, also on hand to discuss the slowing economic outlook, raised interest rates by a total of 4.25 percentage points to 4.5% in a bid to calm the demand and contain price pressures.

“It’s really my responsibility, the federal government’s responsibility, not to do anything that fuels the flames of inflation and forces the Bank of Canada to act,” Freeland said. “So when you put those two things together: an environment of high inflation, high interest rates and a slowing economy – that’s a constrained fiscal environment, and that means we have to behave with real fiscal responsibility. , even if we have to.” these two big investments.

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#Treasury #Secretary #Freeland #pledges #fiscal #prudence #avoid #inflation