Mon. Feb 26th, 2024

In its fall economic statement, the federal government announces measures worth nearly $11 billion in the hope of providing relief the financial burden on the middle class, while avoiding fueling inflation.

Federal measures “ ; responsible , but “modest”

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Federal Finance Minister and Deputy Prime Minister Chrystia Freeland presented her economic update in the House of Commons.

  • Rania Massoud (View profile)Rania Massoud

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With the drop in x27;inflation and the receding specter of a recession in Canada, Deputy Prime Minister and Minister of Finance, Chrystia Freeland, displayed cautious optimism on Tuesday when unveiling the statement fall 2023 economy.

The biggest challenge is finding a balance between the investments Canadians need and ensuring our economic plan is fiscally responsible, Freeland said at a news conference. And we found that balance in our plan unveiled today.

In addition to a portrait in figures of the state of the Canadian economy, this document of more than 150 pages presents a series of measures centered on two major issues: the housing crisis and the increase in cost of living.

Several of these initiatives have already been revealed in the media over the past few days, including additional funding of $15 billion in loans to build more rental housing, as well as additional funding of $1 billion dollars over three years for the construction of affordable housing for the most vulnerable people.

However, these two measures should not come into force before 2025-2026, according to government forecasts.

The other flagship measure to remedy the problem of lack of housing is the restriction of short-term rentals such as Airbnb. The federal government is thus supporting the measures put in place by certain provinces, such as Quebec and British Columbia, and municipalities, such as Toronto, Montreal and Vancouver.

The government therefore intends to refuse tax deductions for expenses incurred to earn income from short-term rentals, including interest charges, in provinces and municipalities that have banned this type of rental. location.

This measure will apply from January 1, 2024.

Furthermore, the government is announcing a new Canadian mortgage charter which provides for a series of commitments from the country's financial institutions, in order to offer personalized relief measures, particularly to mortgage holders. ;subprime mortgages, including temporary extensions of the amortization period.

These measures will help more people overcome the temporary financial stress caused by rising interest rates and allow them to keep their homes, assures the government.

Regarding the rise in food prices, the government has confirmed measures announced earlier this year, including initiatives to strengthen competition in the country, by introducing legislative changes to this effect .

The Liberal government thus promises to strengthen the tools and powers available to the Competition Bureau to crack down on the abuses of large companies in a dominant position.

The Competition Bureau will also be given the means to better detect and counter anti-competitive acquisitions.

The government also promises to make access to mental health care more affordable for Canadians by eliminating the GST/HST on professional services provided by psychotherapists and counseling therapists.

In total, all the measures announced Tuesday represent additional spending of $10.8 billion.

According to the government's baseline scenario, the budget deficit remains virtually the same as what was forecast when the budget was presented last spring, around $40 billion.

The shortfall in public finances in 2027-2028 was however revised upwards in this economic statement with 23.8 billion dollars instead of 14 billion planned in the last budget.

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Consulted by Radio-Canada, Louis Lévesque, economist and former federal deputy minister, believes that this is relatively modest measures given the scale of the challenges facing Canada, especially in terms of housing.

If the government succeeds in reaching an agreement with municipalities to facilitate the construction of new housing, not only from a financial point of view, but also in terms of regulatory relief, there is hope that, in In the next few years, the pace of housing construction will increase, says Mr. Lévesque.

But I think we shouldn't have too many expectations for immediate long-term impacts, he adds.

According to him, what attracts attention is mainly the government's expenditure on debt service costs which should reach $30.6 billion over five years. This is three times more than the spending related to the measures announced today, he notes.

According to him, the evolution of interest rates will need to be monitored both in the short term and in the long term.

The Liberal government finally emphasizes that recession will be avoided in Canada, even under its more pessimistic scenario. In a scenario where growth slows, as the Bank of Canada wants, to bring the economy back to its potential, but without recession, it is a fairly broad consensus that I share, commented Mr. Lévesque.

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