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A global economic debate plays out in Canada as our government goes from miser to spendthrift

Canada's Prime Minister Justin Trudeau and Finance Minister Bill Morneau are taking Canada into unknown waters, betting that spending will do what austerity has not.

Canada’s Prime Minister Justin Trudeau and Finance Minister Bill Morneau are taking Canada into unknown waters, betting that spending will do what austerity has not. (Reuters)

Canada has abruptly switched sides in one of the perennial political and economic battles over how to restart a sagging economy.

To put it in a way that would not please either side, it is the contest between the misers and the spendthrifts. After years of the penny-pinching approach, Canada has switched tack to become a big spender.

And despite some very strong feelings on either side, it is not absolutely clear which is the right path to prosperity. The world will be watching.

The clash over the best way to boost a moribund economy is by no means solely a Canadian argument. Nor is it just a modern debate.

Historical debate

Countries from China and Japan, to Greece and Ireland have taken different views on the subject.

Historically, the dispute has arisen repeatedly — notably during the Great Depression, when the first response of austerity was blamed for making the problem worse. But when governments then altered strategy, new spending failed to lead to a miracle recovery.

Despite monetary stimulus and negative interest rates, Japan’s economy has lapsed into deflation and economic stagnation. (Reuters)

There is plenty of evidence on both sides. As I noted back in 2010, Japan and Ireland backed opposing strategies. But the countries’ circumstances are so different it is hard to declare a definitive winner.

China and Greece switched sides. Greece was driven by the ballot box toward bigger spending, then restrained by their stern European central bankers. China faced alternating worries, first cutting back on fears of overheating and then suddenly spurring new spending on fears of falling growth.

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New law proposed to shift bank failure risk from taxpayers

March 23, 2016

New law proposed to shift bank failure risk from taxpayers

Ottawa proposes ‘bail-in’ regime to force creditors to prop up failing banks

The Liberal government says it will create legislation that shifts some of the risk in a bank failure to creditors. (Canadian Press)

The proposed plan outlined in the federal budget released on Tuesday would allow authorities to convert eligible long-term debt of a failing lender into common shares in order to recapitalize the bank, allowing it to remain operating.

The plan is in line with international efforts to address the potential risks to the financial system from institutions that are deemed too big to fail, the budget document said.

The issue was at the heart of the 2008 global credit crisis, with various governments having to bail out systemically important institutions.

Canada, which escaped the crisis relatively unscathed, did not have to rescue any of its banks though they got billions in support during the crisis and the recession that followed. The government said it will introduce framework legislation for the plan, along with enhancements to Canada’s bank resolution toolkit.

When the Harper government floated the idea of a bail-in regime in 2014, Moody’s cut its ratings on Canadian banks.

Solar on the roof taxed as income

March 21, 2016

Solar on the roof taxed as income

But the cost of a solar system can be written off over a period of years

The solar panels on Mike Brigham's roof in Toronto allow him to sell power back to the grid. He says solar provides power when Ontario most needs it — when the sun is hot and air-conditioners are pushing up power demands.

The solar panels on Mike Brigham’s roof in Toronto allow him to sell power back to the grid. He says solar provides power when Ontario most needs it — when the sun is hot and air-conditioners are pushing up power demands. (Mike Brigham)

After learning he would have to pay to up to $15,000 to bring in electricity via cable and pay a bill year-round despite using the cottage for only a few months, he decided to install his first solar panel.

Since then, he’s upgraded the system at the cottage several times and when he went looking for a lot in Toronto in 2008, he sought out one with ample access to the sun’s rays.

‘When solar generates the most is on summer days when days when aircon loads are really driving up the peaks and the cost of power in the middle of the day goes way up.’– Mike Brigham, Solar Share Co-op

He now has a 5.8-kilowatt solar system on the roof of the home he built in Toronto and sells the power back to the grid under Ontario’s MicroFIT program.

And like every homeowner and farm property owner who has taken advantage of Ontario’s FIT, or feed-in tariff, program for solar, he has to pay income tax on the cash he earns from selling power back to the local utility.

Solar and provincial incentives

It’s not just Ontario where small operators are dealing with the tax implications of small solar projects.

…click on the above link to read the rest of the article…

Canada’s inflation rate cools to 1.4% in February

March 18, 2016

Canada’s inflation rate cools to 1.4% in February

If gasoline prices aren’t factored in, cost of living would have increased by 1.9 per cent

Canada's annual inflation rate fell to 1.4 per cent in February, thanks to lower pump prices.

Canada’s annual inflation rate fell to 1.4 per cent in February, thanks to lower pump prices. (Seth Perlman/Associated Press)

Statistics Canada reported Friday that the Consumer Price Index fell from the previous month because of a big decline of 13.1 per cent in gasoline prices compared to where they were last year.

If gasoline prices are stripped out of the calculation, the inflation rate would be 1.9 per cent.

Food prices, however, were one of the biggest factors keeping the inflation rate up. Consumers paid 3.9 per cent more for food last month compared with February 2015, the data agency said.

Regionally, the inflation rate slowed down in every province. New Brunswick posted the highest annual rate, at 2.4 per cent.

More to come

CANADIAN INFLATION IN FEBRUARY

Fallout in Alberta: The oil crash isn’t just about lost jobs

March 15, 2016

Fallout in Alberta: The oil crash isn’t just about lost jobs

Disillusionment has a way of setting all sorts of bad thoughts in motion

The story assignment from The National was simple. Go to Alberta and talk to regular people about the crash in the price of oil. Humanize the downturn.

Harsh economic numbers coming out of Alberta aren’t hard to find. A projected deficit of $10.4 billion. An unemployment rate of 7.4 per cent, the highest mark since 1996.

Then there was the startling projection from the Conference Board of Canada last week that Alberta will be the only province to see its economy shrink in 2016.

But what do these figures mean for people? How the downturn affects individual lives is much harder to figure out.

It is not always easy to get people to talk about these kinds of things. People who’ve just lost their jobs are busy trying to find another one, or they’re embarrassed by their situations.

But here are three people who agreed to speak to us and share some of their personal experiences during Alberta’s current downturn.

Warren Sonnenberg, Camrose

Warren Sonnenberg

Warren Sonnenberg, in Camrose, says one of the harder things is having friends and neighbours who are too upset to talk about their own situations. (CBC)

Sonnenberg, 35, worked for five years on a drilling rig in the oil patch. He started at the bottom as a leasehand and worked his way up to derrickhand. Before he was laid off in January he was making $40 an hour. He never thought the good times would end.

…click on the above link to read the rest of the article…

Canadians conflicted about 3 Es: Environment, energy and the economy

March 14, 2016

Canadians conflicted about 3 Es: Environment, energy and the economy

EKOS-CBC poll suggests 56% more worried about the economy than the environment

Alberta produces the most greenhouse gases of any province in the country, and has for more than a decade.

Alberta produces the most greenhouse gases of any province in the country, and has for more than a decade. (CBC)

Justin is still working as an oil well cementer in Lloydminster, but his income is down by 50 per cent and the family is dealing with a painful readjustment of their future.

“For the first time in three years, I actually didn’t pay a bill,” said Leanne. “We didn’t have the money to pay it, so I pay a little on this one and all of that one, and the next month, I’ll pay the rest of that one and just try to keep up.”

Justin and Leanne Mills are struggling to pay their bills as work dries up in Alberta’s oilpatch

‘We don’t have a big truck, or a big house, or fancy things and we’re still having trouble getting by.’– Justin Mills, oilwell cementer

Their struggles are one side of the conflict gripping Canadians right now as tension grows between the importance of the environment and the economy. A new CBC EKOS Research poll suggests the country is conflicted between the two priorities, especially when discussing the future of the oil and gas industry.

Leanne has been trying to get pregnant for four years and after a string of miscarriages, she began fertility treatments that cost $600 a month. But, with their drop in income, they can no longer afford the treatments.

EKOS poll Canadians worried about economic issues

“I turned 40 last November and when we spoke to our doctor last, I said that we might not be able to do this for a while,” Leanne said.

…click on the above link to read the rest of the article…

Canada’s debt-to-income ratio sets new record high at 165%

March 11, 2016

Canada’s debt-to-income ratio sets new record high at 165%

Canadians now owe $1.65 for every dollar of income they have at their disposal.

Canadians now owe $1.65 for every dollar of income they have at their disposal. (Joe Raedle/Getty Images)

Statistics Canada says the ratio rose to 165.4 per cent in the fourth quarter, up from 164.5 per cent in the third quarter.

That means Canadian households on average held $1.65 in debt for every dollar of disposable income.

Much of that new debt came in the form of mortgages. “Most of the growth was in mortgage credit, up 6.3 per cent, which has accelerated considerably since 2014 and is now increasing at the fastest pace since late 2012,” TD Bank economist Diana Petramala said.

The increase came as disposable income increased 0.6 per cent.

However, total household credit market debt, which includes consumer credit and mortgage and non-mortgage loans, increased 1.2 per cent to $1.923 trillion at the end of last year.

The total included $573.6 million in consumer credit debt and $1.262 trillion in mortgage debt.

HOUSEHOLD DEBT RATIO

Albertans have highest debt load in Canada, Equifax says

March 10, 2016

Albertans have highest debt load in Canada, Equifax says

Consumer debt delinquencies jump 25% in province, 17% in Calgary

Consumer debt in Alberta has jumped 17 per cent.

Consumer debt in Alberta has jumped 17 per cent. (Joe Raedle/Getty Images)

A study released this morning says consumer debt delinquencies in the province jumped 25 per cent over the same quarter last year.

But the nationwide delinquency rate didn’t change, and Equifax Canada says rates remain at historic lows.

“Despite the ups and downs of today’s economy we’re seeing that Canadians are generally able to manage debt and rein in spending when they have to,” Regina Malina, the senior director of decision insights at Equifax Canada, said in a release.

“It may be a surprise to some, but the fact is delinquency rates in the oil-producing provinces are still relatively low. Most people are still finding a way to pay back what they owe.”

Average provincial debt (excluding mortgages)

Ontario: $21,072
Quebec: $18,070
Nova Scotia: $21,709
New Brunswick: $22,107
PEI: $21,483
Newfoundland: $22,766
Alberta: $27,576 25
Manitoba: $17,913
Saskatchewan: $23,941
British Columbia: $23,040
Canada: $21,458

Average debt in Calgary is $28,421 excluding mortgages, while Edmonton’s average debt is $26,479 compared to average consumer debt nationwide of $21,458.

The only age category to experience an increase in delinquency rates in the last quarter of 2015 was the under-26 group. The rate for that category rose 2.9 per cent.

“Debt is often used as a tool for consumers to accomplish their objectives. However, as people get older, their income earning capabilities generally trend downward,” Equifax said in a release. “To increase their financial security, Canadians should develop a plan to pay off their debt within a set timeframe.”

…click on the above link to read the rest of the article…

Basic income: New life for an old idea

March 9, 2016

Basic income: New life for an old idea

A combination of economic uncertainty and political possibility is giving new life to an old policy idea

A basic income policy could replace existing welfare programs by providing citizens with a guaranteed monthly paycheque.

A basic income policy could replace existing welfare programs by providing citizens with a guaranteed monthly paycheque. (Chris Wattie/Reuters)

Ontario’s provincial budget announced a pilot program to try it out. In Quebec, a cabinet minister has been assigned to study the topic.

The mayors of Calgary and Edmonton are both on board. And the Manitoba Liberals are promising their own trial if they win the April 19 provincial election.

Basic income is capturing political imaginations in Canada.

Also known as guaranteed minimum income, universal income, guaranteed annual income, or a negative income tax, basic income is a social policy that would supplant various welfare programs by providing a baseline amount of money to all citizens, regardless of whether they work or meet a means test.

‘I think part of it is the need to set up social programs for a very different kind of labour force than existed in the past.’– Evelyn Forget, professor, University of Manitoba

The idea is far from new, and it has even been tried in Canada before, in the town of Dauphin, Man., during the 1970s. Google Trends, which tracks the volume of inquiries on the Google search engine, shows an increased number of searches for “basic income” and related terms in the past three years — and especially in recent months.

A world without guarantees

Evelyn Forget, a professor with the department of community health services at the University of Manitoba who researched the Dauphin experiment, recently testified before federal pre-budget hearings on the topic of basic income.

She says the idea’s resurgent popularity may have to do with an uncertain global economy.

…click on the above link to read the rest of the article…

Bank watch lists early warning sign of trouble for oil and gas industry

March 6, 2016

Bank watch lists early warning sign of trouble for oil and gas industry

Royal Bank, CIBC and Scotiabank each added 9 oil and gas firms to watch lists in recent quarterly earnings

In releasing their latest quarterly earnings, Royal Bank, CIBC and Scotiabank each added nine oil and gas firms to their loan watch lists, the latest sign of trouble in the oilpatch.

In releasing their latest quarterly earnings, Royal Bank, CIBC and Scotiabank each added nine oil and gas firms to their loan watch lists, the latest sign of trouble in the oilpatch. (Larry MacDougal/Canadian Press)

Gordon Sick, a finance professor at the Haskayne School of Business at the University of Calgary, said many energy companies are struggling and likely behind in their loans.

“There’s a lot of them who are potentially in default,” said Sick. “The banks in Canada are potentially looking at some hits.”

Royal Bank’s watch list grew after it did a name-by-name stress test on its oil and gas portfolio, said chief risk officer Mark Hughes.

“Following this stress test, we’ve seen a small increase to our oil & gas watch list for closer monitoring,” Hughes said in an email.

One step before ‘impaired’

The watch list has the banks keeping a close eye on the companies, and is one step before impaired status when a bank considers the loan at risk of default.

Scotiabank said five per cent of its energy portfolio was on the watch list and it moved four loans to impaired status in the first quarter. CIBC said it impaired one loan.

…click on the above link to read the rest of the article…

Liberal fiscal plans less transparent than under Harper, Kevin Page says

February 27, 2016

Liberal fiscal plans less transparent than under Harper, Kevin Page says

Kevin Page, Canada’s former parliamentary budget officer, says the Liberal government is even less transparent on fiscal matters than their Conservative predecessors. (Sean Kilpatrick/Canadian Press)

Listen 9:40

Canada’s former parliamentary budget officer says the Liberal government is even less transparent on fiscal matters than the Conservative government it succeeded.

“I don’t think it is [more transparent]. The documents — they’re not better from a government that promised to be better, more transparent … there’s no more information, perhaps even less information, than what we got from the previous government,” Kevin Page said said in an interview CBC Radio’s The House.

“I don’t think we’ve seen the transparency yet,” he said.

Prime Minister Justin Trudeau campaigned on a pledge to run three “modest” deficits of no more than $10 billion a year. But Finance Minister Bill Morneau released his second fiscal update this week ahead of the March 22 federal budget, and his figures show it will be much higher than that.

The deficit will balloon to $18.4 billion in 2016-17 and $15.5 billion in 2017-18 — and that is before any new spending Morneau outlines in the March budget. Those numbers are drastically different from the $3.9-billion and $2.4-billion shortfalls forecast just three months ago.

“A less ambitious government might see these conditions as a reason to hide, to make cuts or to be overly cautious. But our government might see that the economic downturn makes our plan to grow the economy even more relevant than it was a few short months ago,” Morneau said Monday.

Page, who frequently squared off with the previous Conservative government over their fiscal secrecy, says his concerns about transparency stem from a lack clarity around the deficit figure.

…click on the above link to read the rest of the article…

B.C. LNG: AltaGas shelves Douglas Channel project near Kitimat

February 26, 2016

B.C. LNG: AltaGas shelves Douglas Channel project near Kitimat

Company says decision due to poor economic conditions and worsening global energy prices.

Another LNG project in B.C. has been shelved in response to falling global energy prices.

Another LNG project in B.C. has been shelved in response to falling global energy prices. (CBC)

The decision to halt work on the project was blamed on poor economic conditions and worsening global energy prices.

“We believe the project could deliver LNG to Japan at very competitive prices,” AltaGas CEO David Cornhill said Thursday.

“However, without a meaningful offtake agreement the consortium can no longer continue the development of the project.”

AltaGas, along with its global partners in the project, had been aiming for the project near Kitimat, B.C., to begin exporting LNG in 2018.

The announcement comes just weeks after Shell Canada announced it was postponing its final investment decision (FID) on their huge LNG terminal proposal in Kitimat until the end of the year.

Significant decisions to come

Minister of Natural Gas Development Rich Coleman said today’s news does not mean B.C.’s LNG industry is in trouble.

“I don’t think so,” Coleman said Thursday.

“I think we’ve got some significant FID discussions taking place in the next 60-90 days on a couple of projects

“Obviously there’s been two that have told us they want to get to their FID by end of this year…and they’re much larger. This was a very small project.”

The Douglas Channel project is one of the smallest of the more than 20 proposed LNG projects in Canada with the potential to export about 2.4 billion cubic metres of natural gas per year, compared with 33 billion cubic metres for Shell’s LNG Canada project.

…click on the above link to read the rest of the article…

IEA recommends more government funding for energy sector

February 25, 2016

IEA recommends more government funding for energy sector

New report suggests public support for research is dwindling in Canada

Canada should increase funding to the energy sector, according to a new IEA report.

Canada should increase funding to the energy sector, according to a new IEA report. (Kyle Bakx/CBC)

Financial resources are “under pressure” and that’s why the IEA suggests a federal energy research and development strategy could help coordinate the work being done by industry and provincial governments. Such a strategy would focus on clean energy technologies, carbon capture and storage and environmentally beneficial methods for unconventional oil and gas production.

“This will contribute to reducing the environmental impact of energy use and production, as well as the cost of natural resource development, notably for oil-sands operations,” the report states.

In its first in-depth review of the country’s energy industry and policies since 2009, the IEA notes other challenges facing Canada. The country is one of the most energy-intensive nations belonging to the IEA. In addition, changes to electricity generation, such as reducing coal use and nuclear reactors reaching the end of their economic life, threaten the self-sufficiency of some provinces.

Oil Change International protesters COP21

A demonstration by the group Oil Change International at the COP21 climate conference in Paris urged countries to stop subsidizing the fossil fuel industry. (Kyle Bakx/CBC)

In general, Canada needs to adapt to the downturn in oil and natural gas prices, which is impacting government revenue and the country’s economy. The importance of the energy industry to Canada is clearly outlined in the report. In 2014, the sector contributed about 10 per cent of gross domestic product, employed about 280,000 people and accounted for 30 per cent of Canada’s total exports. In addition, the energy sector contributes about $20-$25 billion in taxes, royalties and other payments to federal and provincial governments, each year.

…click on the above link to read the rest of the article…

Encana to cut workforce another 20% on top of earlier downsizing

February 24, 2016

Encana to cut workforce another 20% on top of earlier downsizing

Calgary-based oil and gas producer reports 4th-quarter losses of $612M

Doug Suttles, CEO of Encana Corp., speaks to reporters in Calgary in 2013. The Calgary-based company announced on Wednesday it's planning a further 20 per cent reduction in its workforce to achieve up to $250 million in additional cost savings this year.

Doug Suttles, CEO of Encana Corp., speaks to reporters in Calgary in 2013. The Calgary-based company announced on Wednesday it’s planning a further 20 per cent reduction in its workforce to achieve up to $250 million in additional cost savings this year. (Jeff McIntosh/The Canadian Press)

Details on how many jobs will be affected and when they’ll happen weren’t immediately available.

But the company says by the end of the year, its workforce will be half the size it was in 2013. That works out to roughly 1,600 job cuts over three years.

The Calgary-based oil and gas producer announced the cuts with its fourth-quarter financial report, which included a $612 million net loss or 72 cents per share — mostly the result of asset write downs and other non-operating items.

Those were partly offset by 36 per cent increase in Encana’s liquids production since the fourth quarter of 2014, and previous cost-cutting measures that helped increase Encana’s cash flow despite lower commodity prices.

Excluding $514 million in asset impairments and other items such as foreign exchange, Encana’s operating earnings in the fourth quarter were $111 million or 13 cents per share — up from $35 million or five cents per share a year earlier.

Encana chief executive Doug Suttles said the company enters 2016 with a strong balance sheet, a high-quality portfolio of assets and improved efficiency that offset the impact of reduced capital spending and lower prices for its oil and gas.

‘Difficult to determine’ scope of privacy breach in Five Eyes data sharing

February 23, 2016

‘Difficult to determine’ scope of privacy breach in Five Eyes data sharing

Lack of information about metadata sharing ‘unconscionable’ and ‘irresponsible,’ privacy advocate says

CSE commissioner Jean-Pierre Plouffe told senators Monday that because the data's now erased, it may be impossible to determine the scope of a privacy breach that saw Canadians' information shared with intelligence partners abroad.

CSE commissioner Jean-Pierre Plouffe told senators Monday that because the data’s now erased, it may be impossible to determine the scope of a privacy breach that saw Canadians’ information shared with intelligence partners abroad. (Adrian Wyld/Canadian Press)

Jean-Pierre Plouffe, commissioner of the Communications Security Establishment (CSE), told a Senate committee Monday that data were erased from the agency’s system, making it difficult to find out the number of people impacted.

“It is impossible to know the exact figure. After a certain amount of time, data disappears. They have a deadline after which system data is deleted.”

A month ago, Plouffe tabled his annual report in the House of Commons, revealing for the first time that CSE illegally and unintentionally shared metadata with Canada’s Five Eyes intelligence allies: the United States, United Kingdom, Australia and New Zealand.

That data may include Canadians’ personal information, including phone numbers or email addresses, but not the content of emails or recordings of phone calls.

“It’s not accidental,” Plouffe said in an interview about the CSE breaking the law. “It’s because of a lack of due diligence.”

Metadata is information associated with communication that is used to identify, describe or route information. CSE is supposed to monitor only foreign communications for intelligence that may be of interest to Canada.

If the spy agency comes across Canadians’ information, the law requires it to delete the data from its systems.

…click on the above link to read the rest of the article…

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