fighting-over-money

Recently, Finance Minister Joe Oliver gave an unexpected nod to government stimulus spending.

Headlines may be full of news about Greece and the global economy, but the run-up to Canada’s general election in October is still in full swing. And, there seems to be stormy seas ahead for the Conservative government, which is seeking a fourth mandate after staking its reputation on sound economic management.

Read: Oliver: Too soon to say if Canada’s in recession

Despite macro economic events, and slumping oil prices at home, Oliver says, “What people should understand is some of the measures [that] the prime minister announced, and which I announced in the budget, will inject almost $10 billion in cash into the economy this year.”

Read: A big-picture look at Budget 2015

In fact, he adds, “The two primary sources of that cash input relate to the family benefits program and infrastructure spending. [Those] will have a positive impact on Canadian economic activity.”

More details

For starters, parents with children under age 18 will get new universal childcare benefit cheques (retroactive to January 1st, 2015) on July 20. This is as a result of a one-time, pre-election burst of cash totaling more than $2.5 billion.

Read: Tax tips for parents

Also, Conservative ministers and MPs plan to announce new community infrastructure projects nearly every day this summer from a variety of infrastructure funds, some of which have lain fallow for months. Oliver’s office says the government added more than $1.6 billion to existing infrastructure funding for 2015 and 2016.

Read: The family tax cut could disappear

But economists are divided on whether the family benefit spending spree and the infrastructure dollars will have much economic impact this year. However, they do agree that with a new Conservative balanced budget law in place and an election looming, additional recession-fighting fiscal measures aren’t in the cards for before October.

Mike Moffatt, who teaches economics at the University of Western Ontario, said last week’s 1.2% growth prediction for the year by TD Bank suggests a $3 billion loss in revenue from Oliver’s April budget forecast, which was predicated on annual growth of 2%.

Moffatt, who helped the Liberal party cost its family benefit package, believes this month’s burst of retroactive government cheques will have a positive impact. “I don’t think the government thought we’d be in a recession in July,” he says, so their release is “a happy accident, and I think that is quite beneficial.”

Finn Poschman, vice-president of policy analysis at the C.D. Howe Institute, says the lump-sum family benefits will certainly be welcome. “But, the economic evidence of using transfers to stimulate economic activity is mixed. It’s generally not negative, nor is it strongly positive.”

Interest rate relief

One measure outside the government’s direct control is a move in interest rates.

So far, the Bank of Canada is set to make a scheduled announcement Wednesday amid speculation its trend-setting rate could be cut in an effort to boost the economy. But the bank’s key rate, which is now at 0.75%, is already at rock bottom.

Experts suggest that if today’s interest rate isn’t doing the trick, an interest rate cut won’t make much of a difference—except to consumers and homebuyers, who are responsible for much of the country’s debt.

Read: Average household debt tops $90,000

Originally published on Advisor.ca

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