Parliament Hill building closeup in Ottawa, Canada
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It’s unclear if Canada needs more fiscal stimulus to combat the ongoing economic fallout from Covid-19, but if it does, any added measures should be targeted and temporary, says the working group on the crisis convened by the C.D. Howe Institute.

The Toronto-based think tank published a report detailing the latest meeting of its Fiscal and Tax Working Group, which examined the prospect of further government spending and/or tax relief to help support the economy.

To start, it’s not clear that more stimulus is needed, given that Canadian governments have already been among the most aggressive in providing economic support, the report said.

Some group members said existing measures have provided an accumulation of liquid savings that is “like pre-loaded stimulus, which will be spent and invested when the pandemic abates,” the report said.

At the same time, with Covid-19 infections still high and vaccine rollout unsteady, “Canada’s economy will struggle for some time,” it said.

If the conclusion is that further stimulus is warranted, the group agreed that it should be focused on enhancing the economy’s productive capacity by boosting labour force participation, accelerating immigration and supporting business investment.

Infrastructure investment, such as projects to expand access to reliable high-speed internet, “should be part of any stimulus package,” the report said.

“Because they can be truly temporary, other infrastructure investments, including in climate-change adaptation and in Indigenous communities, are candidates for a growth-oriented stimulus package,” it said.

In terms of tax measures, the group suggested that “a temporary refundable investment tax credit could work.”

Alternatively, the government could undertake a temporary cut in the goods-and-services tax (GST) to provide short-term stimulus and then increase it to finance permanent initiatives in the long run.