Bank of Canada Governor David Dodge gives a speech to the Vancouver Board of Trade, in a Feb. 17, 2005, file photo.CHUCK STOODY/CP
Finance Minister Bill Morneau is being urged to build a financial bridge for businesses and Canadians impacted by the coronavirus in a major economic package scheduled to be unveiled Wednesday.
Former Bank of Canada governor David Dodge told The Globe and Mail that Mr. Morneau needs to make more credit available for small businesses and provide temporary income to Canadians who are not entitled to collect employment insurance.
Mr. Morneau is readying an economic stimulus package that is also likely to include measures to delay tax collections, Mr. Dodge said. One government source, who The Globe and Mail is not identifying because they were not authorized to speak publicly, said a 30-day delay in tax filings for individuals is being considered.
It is important that the economic package provide money to the provinces to help them cope with the health crisis, Mr. Dodge said.
“First off, we need to try to make sure that we can deliver health services that need to be delivered over this period. That’s a provincial responsibility but not all provinces, including Ontario, are in all that good shape,” Mr. Dodge said. “It is far more important for the government of Canada to borrow the money to finance some expansion in those services.”
Mr. Dodge, who also served as a federal deputy finance minister, said he expects the global economy will be virtually idled until the summer with no sign of an economic uptick until the fall.
“We need a bridge from where the economy was in January to where we know it will be next August or September, having passed the valley of death along the way,” he said in an interview. “You are not trying to stimulate demand in the normal sense. … The issue here is supply and services."
Mr. Dodge said the government was right to drop the waiting times for Employment Insurance and to make it more flexible but Ottawa needs to put together a temporary package for people in the gig economy and in the service industry who are self-employed and not able to collect EI benefits.
“The problem is people who won’t be able to work or are prevented from working. They need some sort of a bridge over this period,” he said. “That I think is what one would hope to see them do.”
He also supported the Bank of Canada’s move on Friday to lower interest rates for the second time in two weeks and Ottawa’s move to make $10-billion of additional credit available to businesses through the Export Development Canada and the Business Development Bank of Canada in the planned stimulus package.
But more needs to be done to provide credit for small businesses, Mr. Dodge said.
“What I am really expecting is some further extension of what they have already done. For small businesses, the main thing is that they are going to need credit. That’s fundamental and for major suppliers, the government may have to go in and be either a direct lender or more importantly a direct guarantor,” he said.
Mr. Dodge said Canadians must brace for a permanent loss of output for months and he said it’s difficult to predict the long-term damage.
“In real terms, we are just going to be poorer in the end and the real question is how do you spread the burden of that real loss around,” he said.
The Canadian Labour Congress is calling on the government to make it easier for workers to qualify for employment insurance and to boost the payments awarded under the program. The CLC also is urging the government to create a new “emergency benefit” for workers who are not eligible for regular benefits.
“While we acknowledge the important measures all levels of governments are taking to ease the burden on the business community to help save jobs in the private sector, more must be done to assist front-line workers in health-care fields who are vital in the fight against COVID-19,” CLC president Hassan Yussuff said.
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