CFA WIN! — Canadian Chamber adopts CFA resolution to create a program to help unlock RRSP savings to buy a new or existing business!

At its recent Annual General Meeting, the Canadian Chamber of Commerce adopted a policy resolution, put forward by the CFA, that asks the federal government to create a program to allow RRSP withdrawals for the purchase of a new or existing business

The proposal would allow individuals to withdraw up to $100,000 from their RRSP/RESP accounts to make a down payment on the purchase of a new or existing business, without having to pay tax on the withdrawal.

The program would then require the individual to repay, on a non-deductible basis, the amount withdrawn over a period not exceeding 15 years, beginning the second calendar year following the calendar year in which the withdrawal was made. This is similar in structure to the First Time Home Buyers Plan. The United States allows individuals to borrow from their 401(k) accounts to help capitalize a new business endeavour by borrowing up to $50,000; or half of your vested balance.

The CFA is an active member of the Canadian Chambers Small Business Committee which put the resolution forward.

ECONOMIC IMPACT & RESOURCES

Competition Bureau to probe grocery pricing

Canada’s Competition Bureau says it is launching a study on competition in the grocery industry. The agency said in a press release Monday that it plans to investigate various issues in the grocery industry, “with the goal of recommending measures that governments can take to help improve competition in the sector.”

The bureau functions as perhaps Canada’s most prominent consumer watchdog group by investigating anti-competitive practices that serve to push up prices for consumers, including things like deceptive marketing, price-fixing, and even outright fraud.

The bureau says the move isn’t in reaction to any specific allegation of wrongdoing, but it comes as consumers grapple with food prices rising at their fastest pace in more than 40 years.

Last week, new data showed that while Canada’s inflation rate eased to 6.9 per cent, the prices of food purchased at stores still rose by more than 11 per cent. The price of food has been going up at a faster pace than the overall inflation rate for 10 months in a row now.

Many factors have been blamed for the rapid escalation in food prices, including extreme weather events, higher input costs, and temporary supply chain stresses such as the current invasion of Ukraine. But the bureau says it wants to try to understand if there are any anti-competitive factors at play, so it’s seeking answers to three broad questions:

• To what extent are higher grocery prices a result of changing competitive dynamics?
• What can we learn from steps that other countries have taken to increase competition in the sector?
• How can governments lower barriers to entry and expansion to stimulate competition for consumers?

The bureau says that the relationship between grocery chains and their suppliers will not be included in the study.

The bureau is seeking input from the public on the issue. Anyone wishing to contribute is invited to contact the bureau through its website before Dec. 16. When its investigation is complete, the bureau says it plans to publish its results, with a list of recommendations of how to fix problems it uncovers, if any. That report is expected next June.

Bank of Canada hikes key interest rate half a point to 3.75%

The Bank of Canada unexpectedly slowed its pace of interest-rate hikes as the nation’s economy flirts with recession, although sustained inflation meant it still expects to raise borrowing costs again.

Policymakers led by Governor Tiff Macklem hiked the benchmark overnight lending rate by 50 basis points to 3.75 per cent on Wednesday, less than the 75-basis-point move expected by markets and most economists. The central bank increased rates by three-quarters of a percentage point last month, and by a full percentage point in July.

While officials retained relatively hawkish language around combating inflation, the surprise move will raise questions about the central bank’s appetite to impose further damage on Canada’s economy. Other central banks may also look to their Canadian peer as they too try to work out how aggressively they need to keep tightening monetary policy.

Reaction from economists, however, was critical over a perceived communications misstep.

“The Bank of Canada is growing confident that its actions so far will be enough to vanquish inflation although, by doing less than markets were pricing in, the bank risks sending too dovish a message that it will eventually have to reverse,” Stephen Brown, senior Canada economist at Capital Economics, said in a report to investors.

The bank revised down its growth forecasts, predicting the economic expansion will stall and possibly even contract in coming months. The Bank of Canada also expects inflation will fall sharply to below 3 per cent by the end of next year — within its target range for the first time since early 2021 — as higher borrowing costs curb spending.

“Future rate increases will be influenced by our assessments of how tighter monetary policy is working to slow demand, how supply challenges are resolving, and how inflation and inflationary expectations are responding,” the bank said in the rate statement.

In a less dovish note, officials said inflation remains broad based, with data showing no “meaningful evidence” that underlying price pressures are easing. They again flagged risks of elevated inflation expectations becoming entrenched — perhaps a signal they may be slowing the pace of hikes, but not the destination. And they cited the strength of the U.S. dollar as adding to global inflation.

The Bank of Canada reiterated that it estimates the nominal “neutral rate” for the economy to be about 2.5 per cent, suggesting rates are well into restrictive territory.

“We are resolute in our commitment to restore price stability for Canadians and will continue to take action as required to achieve the 2 per cent inflation target,” the bank said.

The half-point increase means the Bank of Canada may be moving out of step with the U.S. Fed, which is expected to hike by 75 basis points next week. It’s a risky attempt at divergence that could weaken Canada’s currency, loosen financial conditions, drive up prices for imported goods and fuel inflation further.

The Bank of Canada also joins Australia’s central bank in easing off the brakes — with officials in both countries sharing worries about the impact of higher rates on highly indebted households. The Reserve Bank of Australia ended its streak of half-percentage-point hikes on Oct. 4, opting instead to raise the cash rate by 25 basis points to 2.6 per cent.

Canadian policymakers have hiked interest rates by 3.5 percentage points since March, one of the most forceful tightening cycles in the central bank’s history. Traders in overnight swaps markets are still anticipating two more increases in the months to come, but with Wednesday’s smaller move they’re now expecting a terminal rate of 4.25 per cent, compared with 4.5 per cent before the decision.

In the rate statement, Macklem and his officials said tighter monetary policies globally are beginning to weigh on activity around the world. The Bank of Canada is now forecasting hardly any economic growth in the U.S. next year.

While the Canadian economy continues to operate in excess demand, the effects of higher borrowing costs “are becoming evident in interest-sensitive areas,” the bank said. “Economic growth is expected to stall through the end of this year and the first half of next year as the effects of higher interest rates spread.”

The central bank cut its gross domestic product forecast for 2023 by half to 0.9 per cent. It predicted economic growth will decelerate to an annualized 0.5 per cent pace in the fourth quarter of this year.

Separately, in detailed quarterly forecasts accompanying the decision, Macklem and his officials raised the prospect of a technical recession. “A couple of quarters with growth slightly below zero is just as likely as a couple of quarters with small positive growth,” the bank said in the Monetary Policy Report.

Wednesday’s smaller-than-expected rate hike comes amid an increasingly pitched political debate over monetary policy in North America. Macklem is taking fire both sides of the political spectrum in Canada. And the head of the U.S. Senate banking committee is calling on Chairman Jerome Powell to stay focused on employment as the Fed attempts to stabilize prices.

Officials in Canada may also be increasingly worried about growing financial stability risks associated with higher interest rates. In the MPR, the bank highlighted how “financial stresses” have increased globally.

Bank of Canada trims inflation, GDP outlook

The Bank of Canada has lowered its outlook on Canadian inflation and economic growth over the course of the next two years as higher interest rates and weaker demand are expected to ease cost pressures.

The Bank of Canada now projects the Canadian consumer price index (CPI) to come to an average of 4.1 per cent in 2023, down from a prior forecast of 4.6 per cent. Inflation is expected to continue declining in 2024 to 2.2 per cent, slightly lower than the 2.3 per cent the central bank previously forecast in its July Monetary Policy Report.

“The downward revisions are mainly due to lower gasoline prices and weaker demand,” the Bank of Canada said in its October Monetary Policy Report.

“Easing global cost pressures, including lower-than-expected shipping costs, also contribute to reducing inflation in 2023. The weaker Canadian dollar partially offsets these cost pressures.”

Statistics Canada said Canada’s inflation rate in September was 6.9 per cent, edging down from seven per cent in August. Canada’s CPI is expected to come to an average of 6.9 per cent this year, down from earlier forecasts of 7.2 per cent.

The Bank of Canada said in its latest Monetary Policy Report that inflation has declined from a peak of 8.1 per cent in June due to falling gas prices as well as reduced inflationary pressures from agricultural products and other global supply bottlenecks.

“These forces are expected to pass through to lower food and goods price inflation in the months ahead,” the Bank of Canada said.

Higher interest rates will continue to elevate shelter prices, specifically mortgage costs, the central bank noted. Mortgage interest costs are expected to add 0.6 per cent to domestic inflation over the course of 2023 and 2024.

The Bank of Canada broke down several components of how it calculates inflation expectations and sees “other factors” — defined as those which are forces that are underestimated or previously unobserved, such as the pass-through of commodity price moves — as contributing significantly to inflation over the next year. Those “other factors” are expected to not contribute to the Bank of Canada’s inflation outlook in 2024.

The Bank of Canada also revised its projections of economic growth next year by nearly a full percentage point and almost a half percentage point in 2024. While the Bank of Canada has not forecast a recession occurring in Canada next year, it does expect the Canadian gross domestic product to fall to 0.9 per cent next year from 3.3 per cent in 2022. Previously, the central bank expected Canada’s economy to grow by 1.8 per cent in 2023, down from 3.5 per cent this year. Economic growth is expected to pick up to two per cent in 2024.

The Bank of Canada attributed the decline in domestic economic growth to the impact that supply chain disruptions have had on labour productivity, tighter financial conditions and fewer exports amid weak foreign demand.

POLICY UPDATES

BC gig workers invited to engagement sessions about employment standards

A series of regional in-person roundtables will be scheduled to hear directly from gig workers about their jobs and working conditions, and the unique challenges for app-based ride-hailing and delivery workers in B.C.

The roundtables will focus on app-based gig workers, and are part of a provincewide work strategy for workers whose jobs could be described as precarious. The strategy is being led by Adam Walker, Parliamentary Secretary for the New Economy.

The BC government is reviewing the issue to ensure that appropriate standards are in place and could include proposing employment standards amendments for gig workers, as well as ensuring these employees are not incorrectly classified as independent contractors.

The sessions will be scheduled throughout November 2022 in communities throughout the province. As they are confirmed, details of each roundtable will be posted online. Click here to view.

Walker is also consulting broadly with key stakeholders, including app-based companies, industry experts, labour organizations and academics, and engaging with First Nations and Indigenous partners.

Through an online survey, workers will have an opportunity to provide input in the coming weeks.

Working with labour and business organizations and developing a precarious work strategy for B.C. is a mandate commitment for Harry Bains, Minister of Labour, and Walker.

OTHER NEWS

New Alberta cabinet appointed by Premier Danielle Smith

Alberta Premier Danielle Smith has opted for a mix of stability and new faces in her first cabinet.

Travis Toews will return to his prior role as finance minister after narrowly losing to Smith on the sixth ballot in the UCP leadership vote.

Smith has also rewarded Kaycee Madu and Nathan Neudorf with the title of deputy premiers. Madu, who is currently labour and immigration minister, will lead a new ministry of skilled trades and professions, and Neudorf will be at the helm of infrastructure.

There will be 27 ministers around the cabinet table. That’s an increase from the current 20 ministers and five associate ministers.

The appointees most relevant to the CFA are:

• Deputy Premier and Minister of Skilled Trades and Professions – Kaycee Madu
• Deputy Premier and Minister of Infrastructure – Nathan Neudorf
• President of Treasury Board and Minister of Finance – Travis Toews
• Minister of Jobs, Economy and Northern Development – Brian Jean
• Minister of Justice – Tyler Shandro
• Minister of Environment and Protected Areas – Sonya Savage
• Minister of Technology and Innovation – Nate Glubish
• Minister of Service Alberta and Red Tape Reduction – Dale Nally

New Brunswick Throne speech outlines government priorities

On October 25, the New Brunswick Lt.-Gov. Brenda Murphy read the speech from the throne on behalf of the government, opening the second session of the 60th legislature.

The speech from the throne detailed the provincial government’s legislative and policy agenda for the new session. Initiatives relevant to franchised businesses are outlined below:

• Energizing the Private Sector
  • Invest $5 million to help businesses embrace technology for greater productivity and increased output.
  • Increase internet connectivity in remote areas to boost productivity.
  • Reduce personal income tax and property tax to advance a pro-growth agenda and attract more investors.
  • Provide protection for consumers and suppliers, reduce regulatory burden on businesses, and provide greater efficiencies.
• Vibrant and Sustainable Communities
  • Ensure a regional approach to economic development, tourism promotion, community development, regional transportation and infrastructure cost-sharing.
  • Continue to tie annual minimum wage increases to the consumer price index, to ensure New Brunswickers can afford rising costs.
• Dependable Public Health Care
  • Expand the Nursing Homes Without Walls project, enabling seniors to continue living in their own homes for as long as possible.
• World-Class Education
  • Continue creating hands-on experiential work opportunities for students who are interested in learning about key sectors.
  • Clarify language around strike votes, strikes, lockouts and designated workers to ensure sufficient notice periods and continuity of critical services in schools.
• Environment
  • Invest more than $47 million in initiatives to help reduce greenhouse gas emissions, foster educational opportunities, and build resiliency to achieve the province’s greenhouse gas reduction target for 2030 and put New Brunswick on a path to being net zero by 2050.
  • Modernize, expand and establish new waste diversion programs to reduce the amount of solid waste being disposed of and create opportunities to transform it into new materials. The complete text of the New Brunswick speech from the throne is available online.

Promote your job opportunities with the CFA

To take advantage of this new opportunity, please submit your job postings (including a job description and directions for how to apply) to Andrew Schopp at aschopp@cfa.ca. For any inquiries, please contact Jessi-Lyna Wan at jwan@cfa.ca. 

Please note the introductory offer ends October 31st, 2022. Any job posting submitted on November 1, 2022, and onwards will be subject to charges.