Finance Minister Bill Morneau says the Canadian economy is strong enough to weather the economic impacts of the novel coronavirus.
“I recognize that there is a very large amount of uncertainty around the impacts of COVID-19, around the depth of the impact and the geographical spread and the potential duration,” Morneau said Monday on Parliament Hill.
The message came on a day that saw oil prices decline sharply and stock markets take a hit.
Morneau said the federal government has enough wiggle room in its finances to help individuals and businesses deal with the fallout.
“We’re also making sure that we tell people that we have their backs — that we are thinking about impacts on individuals, employees, that we are focused on how we can support businesses to the extent that businesses need to be supported in a challenging time,” he said.
“We a very strong fiscal position,” he said.
Morneau noted the federal debt as a percentage of the national economy, known as the debt-to-GDP ratio, remains relatively low.
“It provides us with fiscal capacity to deal with challenges, to help people today, to help our economy tomorrow,” he said.
But he was not sharing any details of those plans — or the date when the federal budget will be released. He also would not reveal whether he expects the deficit to be bigger than previously projected, given the sharp decline in oil prices and the hit the markets took Monday.
The Trudeau Liberals are being urged to ease access to federal sick-leave benefits, along with tax credits and other breaks, to help workers who feel they can’t afford to stay home when sick, as well as to help small businesses that might not have the cash flow to manage the effects of the outbreak.
The business and labour groups pushing for these measures say federal officials appear open to easing access and potentially waiving the waiting period for employment insurance benefits for workers who need to go under quarantine.
On Friday, Morneau said plans for Ottawa to help with these challenges are on the way.
Morneau has said the federal government can increase spending — up to $41 billion by the parliamentary budget officer’s most recent calculations at the end of February — and keep the debt-to-GDP ratio declining over the long term.
Then over the weekend came an oil-price war between Saudi Arabia and Russia that lowered the price of crude far below budget projections.
The Liberal government’s economic update from late last year projected the price of West Texas Intermediate at US$57 a barrel for this calendar year. On Monday, it was trading around US$30.
The parliamentary budget officer has previously estimated a US$15 decline in crude prices would shave $4 billion off the budget for the fiscal year beginning April 1.
There will be an impact on federal books because Canada is net exporter of oil, said Mostafa Askari, chief economist at the Institute of Fiscal Studies and Democracy — a think-tank run by former parliamentary budget officer Kevin Page.
How the government responds to COVID-19 and this new shock to the economy should be assessed by whether the measures are temporary, timely, and targeted, said Askari, a former deputy budget officer.
Waiving the waiting period to receive EI payments would help workers who find themselves suddenly under quarantine, or encourage them to self-isolate to contain the spread of the disease, said Dan Kelly, president of the Canadian Federation of Independent Business.
“It would send the message that a worker could essentially not have to drag themselves to work if they were sick,” said Kelly, whose organization represents over 100,000 small- and medium-sized businesses.
Likewise, reducing the number of hours necessary to qualify for payments would provide benefits to low-income workers who can’t afford to take time off for illness, said Hassan Yussuff, president of the Canadian Labour Congress.
“You’re going to have to find a way to help them get some income because in absence of that, they are going to go to work because they don’t know what else to do. They need the money to pay their bills.”
He added that his group has asked the government to consider asking banks and credit-card companies to relax payment schedules for those whose earnings are affected by COVID-19.
Trevin Stratton, chief economist at the Canadian Chamber of Commerce, said any tax credits and tax-filing extensions for affected businesses could help companies weather the economic storm by giving them short-term cash flow help.
Some countries, including Italy, have already enacted similar measures, while countries like the United States are considering them, he said.
The Canadian Press