Canada is promising $82 billion in financial relief to soften the blow of the pandemic crisis that is causing massive upheaval and uncertainty in this country and around the world.
Prime Minister Justin Trudeau announced Wednesday that his government would provide up to $27 billion in direct support for Canadian workers and businesses impacted by the COVID-19 virus, and would allow an additional $55 billion in tax deferrals to keep money flowing through the economy during the difficult months ahead.
Meanwhile, the Bank of Canada has not yet followed the lead of the United States which has lowered its benchmark interest rate to near zero. But, since the beginning of March, it has cut the target overnight rate by a full point to .75 percent and has adjusted its liquidity operations to maintain market function and credit availability.
“We are closely monitoring market developments and we stand ready to provide all liquidity the financial system needs so that it can continue to serve Canadians,” Stephen Poloz, the Bank of Canada Governor, said at a Wednesday morning news conference he attended with Canadian Finance Minister Bill Morneau.
Poloz told reporters he would not rule out taking any additional measures, including quantitative easing or making an additional rate cut before the Bank’s next scheduled rate announcement on April 15. “We have made a lot of moves in just a few days,” he said. “Just yesterday, the Bank did just under $35 billion of unusual or quite exceptional transactions, and that is across a wide range of programs, some of which we had never done before.”
That includes the Bank’s first purchase in the secondary market of Canada mortgage bonds. “This is all aimed at keeping credit channels open so that, out there, businesses and households have lines of credits with banks,” said Poloz, “And we want to make sure that the system functions well and the banks are still in a position to continue to offer credit to people when they actually need it, which is in a situation like this.”
The Bank’s actions augment the massive package of relief announced Wednesday by Trudeau and Morneau which includes wage subsidies or replacements for those who will lose their jobs as a result of the pandemic disease, and for those who must take time off work after contracting the illness or who stay home to care for a loved one.
Supports are being provided through Canada’s Employment Insurance program, as well through a new Emergency Care Benefit for self-employed workers who have not paid into that plan. Canada’s large banks have agreed to defer mortgage payments for up to six months if homeowners are suffering financial hardship. Student loan payments are being delayed, low-income Canadians will get tax credits, and parents will get help to deal with school closures.
Meanwhile, Canadians who would have owed 2019 income tax on April 30 will now have until September to pay.
In addition, the government is offering to offset the wages paid by small businesses, and to provide more than $10 billion in credit support to hard hit sectors through the Business Development Bank of Canada and Export Development Canada.
Plus, the Office of the Superintendent of Financial Institutions is lowering the Domestic Stability Buffer by 1.25 percent of risk-weighted assets, effective immediately, to allow Canada’s large banks to inject $300 billion of additional lending into the economy.
Morneau said the measures announced Wednesday were just the start of the steps the Canadian government will take to counteract the impact of the pandemic crisis.
“When the time is right, we will announce more long-term investments to assist with recovery,” he said, “and help Canadians get back to their daily lives.”