June 17, 2022
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POLICY UPDATES
Federal government tables Consumer Privacy Protection Act
The bill which was tabled on Thursday proposes new rules to protect personal information and would give Canadians more control over how their personal data is used by commercial entities, impose fines for non-compliant organizations and introduce new rules for the use of artificial intelligence.
This is the first major update in this policy area since before the advent of Facebook, Twitter.
The proposed Consumer Privacy Protection Act establishes penalties of $25 million (US$19.4 million), or as much as 5 per cent of global revenue, whichever is greater, for companies that breach privacy rules.
The bill will allow Canadians to move their information from one company to another securely and request that data be deleted. It will also limit the collection and usage of minors’ information and give the country’s privacy commissioner broad powers to order a company to stop collecting data or using personal information.
The legislation is part of the government’s Digital Charter Implementation Act and comes amid broader calls by several business groups to reform Canada’s privacy law to be more closely aligned with those of key trading partners, including the European Union.
They also tabled the Personal Information and Data Protection Tribunal Act to create a new court to enforce the privacy law, and the Artificial Intelligence and Data Act to establish a new AI and data commissioner who will monitor company compliance to ensure technology is used responsibly.
Click here for more information
ECONOMIC IMPACT & RESOURCES
Freeland details $8.9B in measures to tackle affordability
Deputy Prime Minister and Finance Minister Chrystia Freeland has presented a multi-pronged “affordability plan” outlining how the government intends to address inflation, based on pre-existing commitments at B.ay Street’s Empire Club in Toronto on Thursday
The measures, totalling $8.9 billion in spending this year, include planned boosts to certain benefit programs, as well as the federal government’s child and dental care plans. Freeland also cited “respect” for the Bank of Canada, fiscal restraint, and creating “good jobs,” as measures that will help steer the economy through the current turbulence.
Freeland spoke about the state of the Canadian economy and about the federal government’s next steps as it relates to measures rolling out to eligible Canadians soon. Specifically, in signalling that the Liberals do not plan to roll out new government spending to address the current cost-of-living crunch, Freeland cited a series of “real and tangible steps” that she promised would “get inflation under control.”
The federal plan meant to improve affordability includes:
- The anticipated enhancement of the Canada Workers Benefit that will see the eligible estimated three million full-time, minimum-wage workers receiving up to $1,200 more through their tax return.
- The expected cutting of child care fees for Canadian families, estimated at an average of 50 per cent by the end of the year.
- The enacting of the longstanding commitment to increase the Old Age Security pension for seniors 75 years and older by 10 per cent, providing more than $766 to full pensioners in the first year.
- The issuing of a one-time housing affordability payment providing a $500 payment to nearly one million low-income Canadians this year.
- The commitment to enact a dental care program that in 2022 will provide coverage for Canadians who earn less than $90,000, starting with children under the age of 12.
- The increase expected to a host of other benefits, because they are indexed to inflation. This includes the Guaranteed Income Supplement, Canada Pension Plan, the Canada Child Benefit, and the GST Credit.
All of the initiatives cited by Freeland on Thursday, stem from the last two federal budgets. Still, the finance minister suggested that the spending is still “new money for the Canadians receiving it this year.”
In the speech—the first major remarks from Freeland on the topic since the 2022 federal budget was tabled in April—the deputy prime minister painted a picture of where Canada stands compared to other countries.
Click here to read the text of Minister Freeland’s speech
Bank of Canada sees higher odds of rates over ‘neutral’ 3% range
The Bank of Canada indicated that persistent price pressures are making it more likely policymakers will need to raise borrowing costs to contractionary levels in order to keep inflation expectations anchored.
In a speech a day after the central bank raised its benchmark overnight rate by a half percentage point to 1.5 per cent, Deputy Governor Paul Beaudry gave new guidance Thursday on how high borrowing costs could rise. The policy rate may now go to the top, or even above, what the Bank of Canada considers its “neutral range,” estimated at between 2 per cent to 3 per cent.
During their policy deliberations this week, Beaudry said officials discussed how price pressures continue to surprise on the upside and are broadening, with inflation poised to move even higher before easing.
“This raises the likelihood that we may need to raise the policy rate to the top end or above the neutral range to bring demand and supply into balance,” Beaudry said in prepared remarks of the speech provided to journalists. He was speaking in Gatineau, Quebec.
The comments will firm up market expectations the central bank may need to increase rates to levels that more actively slow economic growth in order to contain three-decade-high inflation.
Market response
Investors had already raised bets on Wednesday for a higher terminal rate and faster pace of tightening, after the central bank said in its policy decision it was prepared to act “more forcefully” if needed to control inflation.
Half point increases are now fully priced in for policy meetings scheduled in July and September, with traders seeing the rate maxing out at about 3.25 per cent. The policy rate was as low as 0.25 per cent earlier this year, before the central bank began its hiking cycle in March.
Asked at a press conference following the speech what the Bank of Canada means by being more forceful, Beaudry said officials are thinking about “pace and kinda level and speed of getting there.” He didn’t specifically say if a 75 basis point hike is an option.
“We see this aspect of potentially needing to go higher than we thought before and we still have the idea that we want to get there as quickly as possible so that could involve doing more moves in a row or it could involve bigger moves,” he said.
Asked whether the central bank would be prepared to engineer a recession if needed, the deputy governor said policymakers will do whatever is necessary to bring inflation back to target.
Beaudry used much of the speech to outline how the central bank is trying to prevent inflation from becoming entrenched and self-fulfilling by keeping inflation expectations anchored.
He also defended the central bank’s decision not to start hiking rates until March this year, but said the situation has changed.
“The bottom line is that the risk is now greater that inflation expectations could de-anchor and high inflation could become entrenched,” Beaudry said.
OTHER NEWS
Pandemic spurs entrepreneurial boom in Canada: Poll
New research indicates the pandemic spurred an entrepreneurial boom in Canada.
A survey by Intuit, a global tech firm that makes software like TurboTax and QuickBooks, shows nearly a quarter of small businesses in Canada were started in the last two years. The poll, conducted by Angus Reid, also found that new entrepreneurs are almost twice as likely to have multiple businesses.
The survey found generation Zs and millennials (roughly speaking, adults aged 40 and younger) make up more than half the entrepreneurs that started new businesses. The flurry of entrepreneurial activity among younger Canadians during the pandemic reflects in part how technology is helping lower barriers to entry.
The survey also found
- 25 per cent of Canadian entrepreneurs polled consider their business to be a side hustle.
- 63 per cent of new entrepreneurs earn more money as a small business owner than they did at their previous job.
- 90 per cent of new entrepreneurs said they still feel optimistic about the future.
Canadian Industry for Ukraine Web Portal
What is the purpose of the portal?
ISED’s Canadian Industry for Ukraine web portal will provide a single window point of entry for Canadian companies wishing to support the Government of Canada and its settlement partner organizations’ response to the crisis in Ukraine.
What options will companies have?
Businesses will be able to select from four options from the portal landing page, depending on the support they are interested in providing:
- Financial aid
- Jobs in Canada
- Goods and Services
- Overseas donations
Jobs for Ukraine
Job Bank directs companies to ESDC’s Ukraine Job bank where employers can post job opportunities for displaced Ukrainians. Click here to connect with Ukrainians looking for a job.
Ottawa announces suspension of vaccine mandates for domestic travel, federal employees
The federal government has announced a suspension of vaccine mandates for federal employees and for passengers wishing to board a plane or train in Canada.
Federal employees and transportation workers in federally regulated sectors will no longer have to be fully vaccinated as a condition of their work. Those on unpaid administrative leave because of their vaccination status will be invited to return to work.
Starting June 20, vaccines will no longer be required for travellers in Canada. Canadian citizens entering the country from abroad will still be required to meet entry requirements and masks will remain mandatory for those boarding planes or trains in Canada. Visitors to Canada will have to be fully vaccinated to enter the country, or meet the requirements of an exemption.
NEWS FROM OTHER COUNTRIES
US News: U.S. Fed hikes 75 basis points, Powell says 75 or 50 likely in July
The Federal Reserve raised interest rates by 75 basis points — the biggest increase since 1994 — and Chair Jerome Powell said officials could move by that much again next month or make a smaller half-point increase to get inflation under control.
Slammed by critics for not anticipating the fastest price gains in four decades and then for being too slow to respond to them, Powell and colleagues on Wednesday intensified their effort to cool prices by lifting the target range for the federal funds rate to 1.5 per cent to 1.75 per cent.
“I do not expect moves of this size to be common,” he said at a press conference in Washington after the decision, referring to the larger increase. “Either a 50 basis point or a 75 basis-point increase seems most likely at our next meeting. We will, however, make our decisions meeting by meeting.”
Officials projected raising it to 3.4 per cent by year-end, implying another 175 basis points of tightening this year.
The median prediction of officials was for a peak rate of 3.8 per cent in 2023, and five forecast a federal funds rate above 4 per cent; the median projection in March was for 1.9 per cent this year and 2.8 per cent next. Traders in futures markets were betting on a peak rate of about 4 per cent ahead of the release.
The Fed reiterated it will shrink its massive balance sheet by US$47.5 billion a month — a move that took effect June 1 — stepping up to US$95 billion in September.
The Federal Open Market Committee “anticipates that ongoing increases in the target range will be appropriate,” it said in a statement after a two-day meeting in Washington. “The committee is strongly committed to returning inflation to its 2 per cent objective.”
The central bankers also revised their outlook for the economy from the soft-landing scenario of March to a bumpier touchdown, underscoring the tough task Powell faces as he tries to tame inflation running about three times the Fed’s 2 per cent target without causing a recession.
Having just won Senate confirmation to a second four-year term, Powell must also re-establish the Fed’s inflation-fighting credibility with investors and with Americans who are furious over the soaring cost of living.
“We’d like to see demand moderating. Demand is very hot still in the economy. We’d like to see the labor market getting better in balance between supply and demand,” he said, adding that officials won’t “declare victory” until they see compelling evidence that inflation is coming down.
He dismissed the suggestion that the Fed was trying to induce a recession, saying he saw “no sign” of a broader slowdown while assuring Americans that higher rates could be borne.
“It does appear that the US economy is in a strong position, and well positioned to deal with higher interest rates,” he said.
The Fed aims for 2 per cent inflation measured by the Commerce Department’s personal consumption expenditures price index, which rose 6.3 per cent in the 12 months through April, near a 40-year high. Policy makers now forecast the gauge to advance 5.2 per cent this year, up from 4.3 per cent in the March projections, based on the median estimate of Fed governors and regional presidents.
They forecast gross domestic product growth to slow to 1.7 per cent this year compared with a 2.8 per cent expansion projection in March. Unemployment could rise to 4.1 per cent at the end of 2024 from 3.6 per cent.
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