Economic Road Ahead Remains Long and Challenging

On Monday (November 30), the Government of Canada announced its 2020 Fall Economic Statement, offering the clearest picture of federal finances and economic assumptions in over a year. The Statement reaffirms the economic road ahead remains long and challenging even after a vaccine for COVID-19 is approved and deployed in Canada. 
The numbers can be startling:

• Total support offered during the pandemic is over $490 billion.  
• The federal deficit for this year is $381.6 billion. 
• The federal net-debt is $1.2 trillion. 

To carry the weight of the country’s growing fiscal obligations, the Government continues to rely more on borrowing at low rates for longer terms, than on expanding economic growth.  
Here is a summary of some of the key new features:
Targeted Stimulus to Jumpstart Recovery 

• To ensure a robust and resilient recovery, the government is developing the details of a plan to help Canada build back better, by preparing to invest up to $100 billion over the next three fiscal years – roughly valued at between 3 to 4 per cent of GDP.

The Canada Emergency Wage Subsidy 

• Given the ferocity of the second wave and its expected economic impact, the government is proposing to increase the maximum subsidy rate to 75 per cent for the period beginning December 20, 2020 and to extend this rate until March 13, 2021, to provide greater certainty to employers. 

The Canada Emergency Rent Subsidy 

• To provide certainty to businesses and other organizations, the government is proposing to extend the current subsidy rates of the Canada Emergency Rent Subsidy for an additional three periods. This means a base subsidy rate of up to 65 per cent will be available on eligible expenses until March 13, 2021. 

Support for Highly Affected Sectors 

• The government will work with financial institutions in the near term to create the Highly Affected Sectors Credit Availability Program (HASCAP) – a new program for the hardest hit businesses, including those in sectors like tourism and hospitality, hotels, arts and entertainment. This stream will offer 100 percent government-guaranteed financing for heavily impacted businesses, and provide low-interest loans of up to $1 million over extended terms, up to ten years. 

Support for Tourism and Hospitality 

• Recognizing the importance of the Regional Relief and Recovery Fund in supporting local tourism businesses, the government will earmark a minimum of 25 per cent of all the Fund’s resources to support local tourism businesses, providing more than $500 million in program support through June 2021. 

Support for Innovative Businesses 

• To ensure that innovative, intellectual property-rich firms have the support they need to face the challenges presented by COVID-19, it is proposed that $250 million over 5 years, beginning in 2021-22, be provided to the Strategic Innovation Fund. 

Simplifying the Home Office Expense Deduction 

• Allowing employees who are working from home due to COVID-19 and eligible to claim home office expenses to deduct up to $400 in 2020 using a simplified flat rate, and generally do not request form T2200 from these employees. 

Additional measures include: changes to the GST/HST system; to ensure that the GST/HST applies in a fair and effective manner to the growing digital economy, including leveling the playing field between resident and non-resident vendors, (Think Amazon, Air BnB, etc.); work towards a Canada-wide Early Learning and Child Care System; enhancements to Employment Insurance, help for young people by supporting up to 120,000 job placements through Canada Summer Jobs in 2021-22 – an increase of 40,000 from 2020-21 levels; additional Investments in Training and Skills, Energy Retrofits and more.
For full details on the Fall Economic Statement, visit our website peterboroughchamber.ca

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