090128 canada's economic action plan (slides)

8/14/2019 090128 Canada's Economic Action Plan (Slides)

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Outline

Global Economic andFinancial Context

Canadas Economic ActionPlan

Medium-Term ObjectivesFiscal Advantage


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Global Economicand Financial

Context


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Global credit crisis is affecting cost and availabilityof credit in Canada

Credit Spreads Business Lending Conditions

Notes: These spreads are a measure of banks funding costs relative to a risk-free rate and area gauge of financial market stress and banks financing pressures. The rate on the overnight-indexed swap (OIS) is used as a proxy for expected overnight rates. LIBOR is the LondonInterbank Offered Rate. CDOR is the Canadian Dealer Offered Rate.

Daily data up to and including January 21, 2009.Source: Bloomberg.

Note: Pricing conditions refer largely to the cost of borrowing, whereas non-pricing conditions referto access to credit and lending terms. The balance of opinion is calculated as the weightedpercentage of respondents reporting tightened credit conditions minus the weighted percentagereporting eased credit conditions.

Source: Bank of Canada - Senior Loan Officer Survey.

basis points

-40

0

40

80

120

160

200240

280

320

360

400

Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09

Canada (CDOR - OIS)

U.S. (LIBOR - OIS)

Euro area (LIBOR - OIS)

balance of opinion, percentage points

-60

-40

-20

0

20

40

60

80

100

1999 2001 2003 2005 2007

Pricing

Non-pricing

Easing

Tightening


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Sharp drop in commodity prices affecting incomeand tax base in Canada

Commodity Prices(in U.S. dollars)

Index 1997=100

Note: Monthly data for January 2009 includes data up to and including January 16, 2009.Source: Department of Finance Commodity Price Index.

Index 1997=100

75

100

125

150

175

200

225

Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09

50

150

250

350

450

550

650

Total (left scale)

Non-Energy (left scale)

Energy (right scale)


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Economic situation in Canada remains better thanin most other major industrialized countries, inparticular the U.S.

Index of Total Employment

Index, January 2005 = 100

Sources: Statistics Canada; U.S. Bureau of Economic Analysis.

98

100

102

104

106

108

Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09

U.S.

Canada

U.S. entersrecession

Canada entersrecession


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G-20 Commitment

Stabilize the financial system

Strengthen financial markets and regulatoryregimes

Stimulate domestic demand / Maintain fiscalsustainability


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CanadasEconomic Action

Plan


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Guiding principles of the Economic Action Plan

Timely, targeted, temporary

Fiscal costs concentrated in 2009-10 and 2010-11

Maximizes economic effect

Strong Accountability Framework

Balance stewardship and governance with urgency

Initial progress report this summer

Update Parliament first week following summer recess

Realign if necessary in Fall Update


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Budget 2009: Canadas Economic Action Plan

Access to Financing and StrengthenCanadas Financial System

Support Canadians Stimulate Housing

Build Infrastructure

Support Businesses and CommunityAdjustment


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Improving Access to Financing The ExtraordinaryFinancing Framework ($200 billion)

Insured Mortgage Purchase Program $125 billion

New 10-year Canada Mortgage Bond $10 billion

Canadian Lenders Assurance Facility -

Canadian Life Insurers Facility -

EDC and BDC $13 billion

ABS Facility $12 billionBank of Canada $40 billion

Expanded authorities to strengthen financial system


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Strengthening Canadas Financial System

Safeguarding Canadas financial stability by:

Broadening Minister of Finances authority

Providing CDIC with greater flexibility

Providing standby authority for the Government to inject capitalinto federal financial institutions


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Action to Help Canadians and Stimulate Spending($12.8 billion)

The Canada Skills and Transition Strategy

$1.9 billion to strengthen benefits

$1.9 billion to enhance the availability of training

$4.5 billion to keep EI rates frozen

Tax relief for Canadians

Significant personal income tax relief

Increases to the National Child Benefit and Canada Child Tax Benefit Doubling the tax relief provided by the Working Income Tax Benefit

(WITB)

Increase to the Age Credit amount


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Impact of WITB and other tax measures

Lowering the Welfare Wall

Average Effective Marginal Tax Rates (per $10,000 in additional income 2009)

Earned Income/Net Family Income

0

20

40

60

80

$3,000 - $10,000 $10,000 - $20,000 $20,000 - $30,000 $30,000 - $40,000

Rates ( Pre-Budget 2006)

Existing rates with measures announced in Budget 2009

%

%

%

%


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Action to Stimulate Housing Construction($7.8 billion)

Investments in social housing for low-income Canadians($2.1 billion)

Tax support for home ownership and the housing sector($3.7 billion)

Home Renovation Tax Credit

Enhancing energy efficiency

First-Time Home Buyers Tax Credit

Home Buyers

Plan (increasing limit from $20K to $25K)

Direct, low-cost loans to municipalities through the CMHC($2 billion) (sewers, water lines, neighbourhood regenerationprojects)


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Immediate Action to Build Infrastructure($11.8 billion)

Provincial, territorial and municipal infrastructure

Infrastructure Stimulus Fund ($4 billion)

Green Infrastructure Fund ($1 billion over 5 years)

RInC ($500 million)

First Nations infrastructure

Knowledge infrastructure

Deferred maintenance and repairs at post-secondary institutions ($2 billion)

Canada Foundation for Innovation ($750 million over several years)

Canada Health Infoway : Goal of 50% of Canadians with an electronic healthrecord by 2010 ($500 million)

Broadband access in rural communities ($225 million over 3 years)

Federal infrastructure


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Action to Support Businesses and Communities($7.5 billion)

Capital Cost Allowance Computers (temporary 100%)

Manufacturing and processing M&E (temporary 50% straight lineaccelerated)

Tariff relief on machinery and equipment Sectoral adjustment

Community Adjustment Fund ($1 billion)

Support to automotive sector in collaboration with Ontario

Support for culture and the arts ($335 million)

Clean energy technologies ($1 billion over 5 years)

Support to small businesses ($365 million)


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Canadas Tax Advantage

METR on New Business Investment, selected country groups, in 2012

Per cent

Source: Federal 2008 Budget

21.9

33.3

27.1 25.3

20.3

16.4

34.4

0

5

10

15

20

25

30

35

40

United States Canada Next lowest in theG7

Canada OECD average Small developedcountries average

Canada

Prior toBudget 2006 Including measures in

the 2007 EconomicStatement Provincial retail sales tax

harmonization plusfederal-provincial CIT

rate to 25%


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-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

CAN US* JP GER FR IT UK

2009 2010

Fiscal stimulus in Canada compared to othercountries

Proposed Budget MeasuresPer cent of GDP Per cent of GDP

Budgetary Actions

*For the U.S.: Expected based on current information.Sources: Government releases, analyst estimates.

1.5

1.1

0.4

0.3

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2009 2010

Provincial/Municipal

Leverage

Federal

Contents of U.S. stimulus package: Tax State Funding Other

1.9

1.4


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Fiscal Plan


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Private-sector outlook for 2009 revised down andprudent budget planning assumptions

2009 GDP Growth Outlook Forecast Distribution of Nominal GDPGrowth in 2009

Per cent

Sources: Statistics Canada; Department of Finance Survey of PrivateSector Forecasters.

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

Statement 2008 Budget 2009

Real

Nominal

Budget Planning

Forecast Distribution of Nominal GDPGrowth in 2009

Per cent

Sources: Department of Finance Survey of private sector forecasters.

Budget Planning= -2.7%

Average= -1.2%

Per cent

-3.5

1.5

1.0

0.5

0.0

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5


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Changes to the budgetary balance since theNovember 2008 Statement

ProjectionFY2008 FY2009 FY2010 FY2011 FY2012 FY2013

(billions of dollars)

2008 Statement Budgetary Balance 0.8 0.1 0.1 1.1 4.2 8.1

Economic ChangesPrivate-sector Average Outlook 0.2 -11.3 -9.9 -6.4 -5.0 -1.8Adjustment for risk -0.8 -4.5 -4.5 -3.0 -1.5 -0.8Total Economic Changes -0.6 -15.8 -14.4 -9.4 -6.5 -2.6

Budget 2009 Measures 1.3 18.0 15.5 4.7 5.0 4.9

Budgetary Balance -1.1 -33.7 -29.8 -13.0 -7.3 0.7


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Internationally, Canada is exceptionally well placeto weather current crisis

15

20

25

30

35

40

45

50

55

60

2006 2007 2008 2009 2010

Canada

G7 average

Total Government Net Debt to GDP RatioPer cent


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Federal Spending Track

Program Spending$ Millions Per cent of GDP

10

11

12

13

14

15

16

17

18

1990-91 1994-95 1998-99 2002-03 2006-07 2010-11

ProjectionActual


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Renewed fiscal strengthRenewed fiscal strength

0

10

20

30

40

50

60

70

80

1979-80 1989-90 1999-00 2009-10

Federal Debt% GDP

Actual Projection


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090128 canada's economic action plan (slides)

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