August 12, 2022
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Ontario Throne Speech
By Scott Munnoch, Temple Scott Associates
On Tuesday, Ontario’s Speech from the Throne, laying Premier Doug Ford’s agenda for the upcoming term which will focus on the Budget originally introduced prior to the election on April 28th. The new Budget Bill was introduced by Finance Minister Peter Bethlenfalvy immediately following the reading of the Throne Speech.
The Speech from the Throne recognizes the difficult times facing governments with ongoing pandemic concerns, high inflation, high fuels costs, labour shortages and supply chain challenges. These challenges cannot be ignored. The Speech identified the Ontario government as being in a good position to meet these challenges.
The Speech reinforced previous announcements of less taxes and regulation to make Ontario competitive and emphasized the government’s theme that less government drives economic growth. On the most significant issue, there were no specific references to how health care challenges would be addressed, only that more can still be done by working with health care partners.
Ontario’s Policy Priorities
With the introduction of the budget immediately following the Throne Speech, the government is signaling its intent to continue along the path announced in the original budget in April of 2022. The budget is focused on five main themes:
- rebuilding Ontario’s economy;
- working for workers;
- building highways and key infrastructure;
- keeping costs down; and
- a plan to stay open.
The Throne Speech highlighted many specific promises, previously announced, with an emphasis on health care.
- Build 30,000 new long-term care beds by 2028, with 31,705 new and 28,648 upgraded beds now in development.
- Investing nearly $5 billion over four years to hire the more than 27,000 new staff that will be needed to provide long-term care home residents an average of four hours of direct care per day by 2025.
- Call for the federal government to increase its share of provincial-territorial health-care spending from 22 per cent to 35 per cent through the Canada Health Transfer.
- Nearly 370,000 jobs currently unfilled, Ontario is facing a generational labour shortage with the lowest rate of unemployment since 1989.
- Ontario has the tools to manage the virus and live with current variants for the long term, without returning to lockdowns.
- Investing $1 billion more to expand home and community care.
- Make Ontario the leading electric vehicle production capital of North America. “From mining to manufacturing” Ontario will offer the full range of processes designed to build the EV vehicles of the future.
- Ontario has reduced the cost of doing business by $7 billion annually.
- Government is also breaking down barriers that prevent out-of-province workers and newcomers from finding good jobs in the trades.
- Enhanced authorities for the Mayors of Toronto and Ottawa. Strong-mayor systems will empower municipal leaders to work more effectively with the province to reduce timelines for development, standardize processes and address local barriers to increasing the supply of housing.
- Increases Ontario’s minimum wage to $15.50 per hour on October 1, 2022.
What’s Next: A Rare Summer Sitting
MPP’s have been told to expect a five-week session which would mean sitting through the Labour Day weekend until September 8th. With a large majority, the government should be able to meet this goal. The House will then adjourn for at least a week before returning on regular business. It remains to be seen how much other business will be introduced and what bills the government will introduce this summer. More than likely, the focus will remain on the budget with a resumption of regular business in September.
Click here for more information and analysis and opposition reaction.
POLICY UPDATES
CASSELS: What Franchisors Need to Know About the New Wage Fixing and No-Poaching Provisions in Canadian Competition Legislation
The countdown is on for the implementation of new anti-wage-fixing and no-poaching provisions in Canadian competition legislation. Find out what you need to know about this new law before it comes into effect in 2023.
ECONOMIC IMPACT & RESOURCES
Insolvencies jump in Canada as interest rate hikes, inflation bite
Business and consumer insolvencies are marching higher, as climbing interest rates and crushing inflation fuel economic uncertainty, according to an insolvency industry group, the Canadian Association of Insolvency and Restructuring Professionals (CAIRP).
In the second quarter of 2022, business insolvencies climbed 30.9 per cent compared to the same time last year, and they’re up 26.3 per cent from the first six months of 2022.
Consumers are also under pressure. CAIRP’s data show there were 25,266 insolvencies in Q2, up 10.5 per cent compared to the same time last year, and up 9.2 per cent from the previous quarter, in what is the “highest volume” in two years. They are up 32 per cent compared to 2020.
The rising number of insolvencies are directly related to higher inflation and interest rates, CAIRP said.
Things are expected to get worse. During the pandemic, consumer insolvencies fell 40 per cent amid ample government supports that kept Canadians’ finances afloat, CAIRP said. But now that such financial aid has been removed, insolvencies are starting to bounce back, though they still remain below 2019 levels.
Plus, interest rates are rising at a fast clip, a shock for some people’s finances. The Bank of Canada has pledged to keep hiking rates to wrestle soaring inflation back to its two per cent target. Inflation hit 8.1 per cent in June from a year earlier, a level not seen in decades. That’s left Canadian consumers wrestling with growing debt costs from rising interest rates, while trying to manage higher prices of essentials at the same time.
According to a survey released yesterday from Maru Public Opinion and Yahoo Canada, 60 per cent of Canadians have cut their expenses in the face of rising inflation. Of those, 68 per cent have trimmed spending on restaurants, while 61 per cent have cut back at the grocery store.
Inflation and rising rates are also dinging business balance sheets, and are especially painful for those organizations who have not fully recovered from pandemic losses. Business insolvencies are likely to grow in the months ahead, CAIRP said, with some sectors getting impacted more than others. Those include construction, transportation and warehousing.
“Looking ahead, businesses in industries most affected by fluctuations in cost and supply chain pressures and changes in business and consumer confidence are the most vulnerable,” Jean-Daniel Breton, chair of CAIRP said in the release.
OTHER NEWS
Susan Holt elected New Brunswick Liberal leader
Susan Holt has been chosen as the new leader of the New Brunswick Liberal Party. She is the first woman to win the party’s leadership in the province. She won on the third ballot with 51.67 per cent of the vote. Former Liberal MP T.J. Harvey was the runner-up.
Holt will lead the party into the next election against the governing Progressive Conservatives now led by Premier Blaine Higgs.
Canadian economy loses 30,600 jobs in July – unemployment rate still 4.9 per cent
Canada’s economy lost 30,600 jobs in July, according to data from Statistics Canada on Friday. This marks the second consecutive month of employment losses for the country.
The data came in weaker than expected. The median estimate among economists tracked by Bloomberg was for a gain of 15,000 jobs last month and an unemployment rate of 5.0 per cent.
The country’s unemployment rate remained steady at a historic low of 4.9 per cent.
The wholesale and retail trade, health care and social assistance, and educational services sectors collectively saw a loss of 53,000 jobs. The losses were partially offset by the goods-producing sector which gained 23,000 jobs, the labour force survey revealed.
The decline in jobs was roughly the same in both part-time and full-time work, though employment fell the most among women aged 55 and over.
The overall participation rate fell 0.2 per cent to 64.7 per cent in July, compared to the 0.4 percentage point drop in June.
The average hourly wages of employees rose 5.2 per cent on a year-over-year basis, matching the pace set in June.
BMO Report: Workers Wanted: Demand, Demographics and Disruption
A higher percentage of Canadians between 15 and 64 are working now than before the pandemic — so why is there a labour shortage?
Thousands of Canadians retired during the pandemic leaving the country with the smallest working-age cohort since the 1960s. A new BMO report says we may have a labour shortage for years to come.
Click here to read the BMO report.
Unifor members elect Lana Payne as new president
Unifor, Canada’s largest private-sector union, representing more than 300,000 members has elected Lana Payne as national president. Payne was previously national secretary-treasurer of Unifor. She defeated executive assistant to the president Scott Doherty and Unifor Local 444 president Dave Cassidy.
NEWS FROM OTHER COUNTRIES
U.S. inflation rate is lower than expected
US inflation decelerated in July by more than expected, reflecting lower energy prices, which may take some pressure off the Federal Reserve to continue aggressively hiking interest rates.
The consumer price index increased 8.5 per cent from a year earlier, cooling from the 9.1 per cent June advance that was the largest in four decades, Labor Department data showed Wednesday. Prices were unchanged from the prior month. A decline in gasoline offset increases in food and shelter costs.
So-called core CPI, which strips out the more volatile food and energy components, rose 0.3 per cent from June and 5.9 per cent from a year ago. The core and overall measures came in below forecast.
The data may give the Fed some breathing room, and the cooling in gas prices, as well as used cars, offers respite to consumers. But annual inflation remains high at more than 8 per cent and food costs continue to rise, providing little relief for President Joe Biden and the Democrats ahead of midterm elections.
COST OF LIVING
While a drop in gasoline prices is good news for Americans, their cost of living is still painfully high, forcing many to load up on credit cards and drain savings. After data last week showed still-robust labor demand and firmer wage growth, a further deceleration in inflation could take some of the urgency off the Fed to extend outsize interest-rate hikes.
Treasury yields slid across the curve while the S&P 500 was higher and the dollar plunged. Traders now see a 50-basis-point rate increase next month as more likely, rather than 75.
“This is a necessary print for the Fed, but it’s not sufficient,” Michael Pond, head of inflation market strategy at Barclays Plc said on Bloomberg TV. “We need to see a lot more.”
Fed officials have said they want to see months of evidence that prices are cooling, especially in the core gauge. They’ll have another round of monthly CPI and jobs reports before their next policy meeting on Sept. 20-21.
Gasoline prices fell 7.7 per cent in July, the most since April 2020, after rising 11.2 per cent a month earlier. Utility prices fell 3.6 per cent from June, the most since May 2009.
Food costs, however, climbed 10.9 per cent from a year ago, the most since 1979. Used car prices decreased.
What Bloomberg Economics Says…
“With rents still pushing higher and elevated wages beginning to seep into services inflation, we expect this pause to be short-lived. Core CPI could approach 7 per cent in the coming months — despite our assumption of moderation in goods prices.”
–Anna Wong and Andrew Husby, economists
Shelter costs — which are the biggest services’ component and make up about a third of the overall CPI index — rose 0.5 per cent from June and 5.7 per cent from last year, the most since 1991. That reflected a 0.7 per cent jump in rent of primary of residence. Hotels, meanwhile, fell 3.2 per cent.
Elsewhere in leisure, airfares dropped 7.8 per cent from the prior month, the most in nearly a year.
While prices are showing signs of moderating, there are several factors that risk keeping inflation high. Housing costs are a big one, as well as unexpected supply shocks. And wages are still climbing at a historically fast pace, concerning some economists of a so-called wage-price spiral.
However, those gains aren’t keeping up with inflation. A separate report showed real average hourly earnings fell 3 per cent in July from a year earlier, dropping every month since April 2021.
“We’re seeing a stronger labor market, where jobs are booming and Americans are working, and we’re seeing some signs that inflation may be beginning to moderate,” Biden said after the report. He cautioned, “we could face additional headwinds in the months ahead,” citing the war in Europe, supply-chain delays and pandemic-related disruptions in Asia.
The impact of inflation on wages has started to dent spending, with the pace of personal consumption growth decelerating between the first and second quarters.
That said, consumer expectations for US inflation declined sharply in the latest survey by the New York Fed, suggesting Americans have some confidence that prices will come off the boil in the next one to five years.
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