Liberals hope 75% wage subsidy will prompt companies to re-hire many of the six million Canadian workers who have sought federal emergency assistance since the pandemic plunged the global economy into near-deadlock.
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Online applications open April 27 and officials expect 90% of applications to be processed by May 4 and payments will arrive later this week, finance committee members announced on Thursday .
Canada’s highest central banker told the committee that the federal tax measure would help maintain employer-employee ties to foster a recovery.
While the economic freeze should be lifted before the summer, the Governor of the Bank of Canada, Stephen Poloz, has warned that it may take some time before the economy recovers. before the crisis.
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“We’re going to get a V-shaped trajectory, so very strongly, and then of course back off, but not completely,” said Poloz.
“This is when it takes another, maybe a year, for the economy to return to the same path it was before it all started. “
However, the longer it takes for economic activity to resume, the more companies will close permanently and the more workers will face unemployment while looking for new jobs.
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On Thursday morning, the government announced an expansion of a small and medium-sized business loan program, and promised new support for businesses struggling to pay their rent.
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The Canada Business Emergency Account will now provide up to $ 40,000 in government guaranteed loans to businesses with last year’s total payroll of $ 20,000 to $ 1.5 million. It previously offered loans to businesses with a narrower salary range, between $ 50,000 and $ 1 million.
“Our government is here to help you get through this difficult time. So when we hear that the program is not reaching as many people as it should be, we are making changes, “said Prime Minister Justin Trudeau, acknowledging the criticism the government has suffered from companies that felt excluded.
Since the launch of the loan program last month, businesses have made 220,000 loans worth $ 8.8 billion, finance minister Bill Morneau told the finance committee.
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The loans are interest-free until December 31, 2022 and if they are repaid by then, up to 25% will be canceled.
Encouraged by some small businesses that may not yet be eligible for assistance because they pay dividends or employ contractors, Morneau suggested that these workers would be eligible for the Canadian emergency response benefit from 2 $ 000 per month.
The federal government is also working on a program to help businesses and business owners cover their rents for at least three months, although details have yet to be worked out with the provinces and territories, said Morneau.
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The federal government increased spending by more than $ 105 billion to cover budget aid, with monetary policy playing a supporting role as the economy crashed with COVID-19.
The shock also drove oil prices down – Alberta’s benchmark price has fallen 90% since the start of the year due to declining demand and a glut of international supply.
Poloz said the central bank would likely cut its key rate in response to the drop in the price of oil alone.
Canadian economy hits record decline in March
The Bank of Canada made three rate cuts – two unannounced announcements – in March to lower its overnight target rate from 1.75% to 0.25%, which Poloz said is as low as possible.
“On the sole basis of falling commodity prices, I would say that we would have reduced interest rates by at least 100 basis points, like what we did in 2015,” he said. when he last appeared before the committee before leaving office in June.
“Maybe we would have ended up making 150 base points if that was the only shock we were facing. “
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The economic shock of COVID-19 is unlike anything the country has ever seen, said Poloz.
According to a preliminary estimate from Statistics Canada, the economy contracted 9% last month, which would be the worst decline in a month on record.
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On Wednesday, the central bank announced plans to start buying provincial and corporate bonds on the secondary market to reduce the risk of blocking those markets. These measures are expected to inject up to $ 60 billion into the economy and will last, temporarily, for a year.
The bank is also increasing the amount of federal treasury bills it is willing to buy, beyond buying $ 5 billion a week, effectively making more low-interest loans to the government.
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