OTTAWA—The federal government will open the spending taps to throw an economic lifeline to Canadians and businesses as the spread of COVID-19 exacts a growing financial toll, from empty restaurants and theatres to a gutted travel sector.
Prime Minister Justin Trudeau announced Friday that the federal government will release a “significant” fiscal stimulus package next week — which could top $20 billion, one expert predicted — targeted at helping “vulnerable” individuals and small businesses.
“No one should have to worry about paying rent, buying groceries or additional child care because of COVID-19. We will help Canadians financially,” Trudeau told reporters.
“We are obviously focused primarily on how we are going to get money into the pockets of Canadians who will need it because of this situation,” he said.
It was a day when the federal government and the Bank of Canada moved dramatically on several fronts to bolster rattled confidence in the economy and blunt the long-term impacts of COVID-19.
Bank of Canada Governor Stephen Poloz made a surprise Friday afternoon interest rate announcement, further slashing a key lending rate another 50 basis points to 0.75 per cent, just nine days after a similar rate cut.
“It’s already clear that the spread of the coronavirus is having serious consequences for Canadian families and Canada’s economy,” he said.
“There are significant measures happening today and next week which I think people should see as a co-ordinated and very powerful package,” Poloz said.
While the economic impacts of the virus will be temporary, Poloz said he’s concerned that eroded consumer and business confidence could prolong its effects. “These actions are meant to buttress that confidence and get us a bridge across the trouble,” he said.
Finance Minister Bill Morneau said the goal of the coming stimulus package would be “stabilize our economy, support businesses and to protect Canadians during a difficult time.”
“We’re looking at direct measures to support individuals and families,” he said.
“These are extraordinary times and that means we are ready to take extraordinary measures,” said Morneau, who made a rare joint appearance with Poloz.
The government moved on several fronts Friday to free up lending for businesses. Morneau announced $10 billion in new lending for businesses to help them through the crunch. “It will ensure that our businesses continue to be resilient during these very uncertain times,” he said.
As well, Superintendent of Financial Institutions Jeremy Rudin announced a change to the capital requirements for banks that would provide an additional $300 billion in lending capacity.
The finance minister said he’s been assured by chief executives at Canada’s biggest banks that they will support individuals and businesses “in a responsible, fair and compassionate way.”
The promise of a stimulus package came just days after the government rolled out $1 billion in health spending to bolster the federal and provincial responses to the spread of COVID-19 in Canada.
Friday’s rate cut and the government’s promise of aggressive stimulus spending underscores how quickly the crisis is moving and how seriously federal officials view the threat to the economy.
In recent days, professional basketball and hockey leagues have suspended their seasons, darkening arenas and with it, killing business for restaurants and bars. Public health advice to avoid non-essential travel outside the country will deal a further blow to travel and tourism industry already reeling from an unprecedented wave of trip cancellations. The union representing WestJet flight attendants is expecting layoffs of more than 50 per cent of its staff, according to a Canadian Press report.
The suspension of Parliament on Friday, along with the unexpected stimulus, have put a question mark over earlier plans to release the federal budget on March 30. Neither the prime minister nor the finance minister would commit to that date. The focus now, Trudeau said, is on the immediate health crisis and making sure Canadians have the money they need. And Morneau did not respond when asked whether the stimulus spending would force the Liberals to postpone any campaign commitments made in last fall’s election.
Trudeau will talk with other G7 leaders Monday in a “virtual” summit convened by French President Emmanuel Macron.
“We will co-ordinate research efforts on a vaccine and treatments, and work on an economic and financial response,” Macron said on Twitter.
Doug Porter, chief economist and managing director of BMO Financial Group, said the rare Friday afternoon rate cut “speaks to the urgency of the situation.”
He called the actions announced Friday “quite encouraging” and predicted that next week’s stimulus spending could total about one per cent of GDP, or just over $20 billion.
“I think it will go a long way to support the economy. The key for policy-makers is to make sure the economy turns around after it gets through the health crisis,” he said.
“There’s nothing they can do about getting the NHL back up or cruise lines running again. What they can do is soften the blow from those kinds of shutdowns and make sure it doesn’t turn into a deeper economic downturn,” Porter said in an interview.
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