President and Board Chair, New Westminster Chamber of Commerce and President, Integrated Analytics & Research Ltd.
The $1.2 Trillion Federal Debt – Should we Worry?
The current federal debt to GDP ratio is expected to rise to about 49% by the end of 2020-21 from the 31% it is currently – an 18% increase. Adding the provincial debt loads to get a picture of total debt to GDP, Canada will be at about 103% assuming that the provinces have not increased their debt loads in the wake of COVID-19. This will place Canada’s debt to GDP ratio in the same range as the United States (pre-COVID) 108% and slightly higher than Spain’s 97% (2018) level. Should we be concerned? The short answer is yes. Should we be panic? The definitive answer is no. Not unless there is no economic growth or a second wave of COVID-19 necessitates more debt. Even then, panic is not called for unless spending is inappropriately targeted.
Debt to GDP Ratio:
Canada’s total government debt (all levels of government) last topped 100% in 1996 (at 100.2%). At that time, federal government expenditures on servicing the debt amounted to about 1/3 of all its expenditures (over $40 billion in debt service costs). In 1996 the 10-year bond yield was over 7%. By comparison, current federal debt service costs are $23 billion (7% of revenues) with the 10-year bond yield at a little over 0.5%. However, the costs of increased debt for the Canadian government can be expected to add about $10 billion or more to the annual debt service costs going forward. This is an amount equivalent to the total spent on federal infrastructure in 2019.
But 1995/96 was not a good time for Canada. Under then Finance Minister Paul Martin, substantial cuts to transfers to provinces as well as substantial cuts to government programs were made to get the deficit under control, reduce the debt service costs and introduce fiscal discipline. 2020/21 is not 1995/96. The situation of a pandemic differs from years of regular program spending exceeding fiscal capacity. An increase in program spending is exactly what the political climate of a minority government, is pressuring for.
The real costs of servicing Canada’s debt are sensitive, obviously, to interest rates, and economic growth. Interest rates are likely to remain comparatively low in the short term but in the longer run, as governments increasingly compete for borrowing, are likely to increase. The “crowding out” effect is that government borrowing competes with private borrowing leading to interest rate increase. This is even more the case if there is a robust economic recovery and the private sector once again begins to borrow for investment in new plant and equipment. Further, interest rates on federal government debt will necessarily increase as Canada’s bond rating has declined marginally. A post-COVID recovery and economic growth will restore revenues, and assuming some level of fiscal discipline, lower the debt to GDP ratio and the real burden of debt. The hope is for economic recovery post-COVID-!9. But hope, as we all know, is not a strategy.
The Political Climate:
What can we expect of government policy? There are several political considerations which overall point to a continuation of the current Liberal government for nine months to 1 year. Within that period it will be so concerned with re-election that the impetus for reducing expenditures will be modest. It will want to stay on message as best it can and demonstrate some level of fiscal discipline while not hurting its base of support and while continuing to etch away at the NDP support. We need to remind ourselves that:
Economic considerations would also suggest no strong shifts in government policy for this period (nine months to a year). Economic growth is rebounding modestly and there are no signs that interest rates will skyrocket any time soon. There will be calls for a fall economic update, for a robust recovery plan, and the introduction of measures to fix the gaps in the current COVID-19 relief measures but these will largely be priming the public for an eventual non-confidence vote – probably not successful in the fall but possibly succeeding in or by March 2021. Of course, a March 2021 budget will be a confidence vote in itself and the budget will be portrayed by the NDP as being inequitable and having no plan, by the Conservatives as being reckless, and as not benefiting Quebec by the Bloc. .
What is Coming:
So, what is the best estimate of what is to come?
Short Run (1-9 Months)
Long Run: The March federal budget
Toward a June 2021 Election?
In the very long run (more than nine-months), assuming a federal election and a Liberal majority, there will likely need to be some measure of austerity introduced as interest rates increase and the economy rebounds only modestly - not at unprecedented rates. This may take the form of further tax increases, and/or cuts to transfer payments to the provinces. Assuming a Conservative victory, many of the measures introduced by the Liberals will be rolled back particularly any increases in corporate or wealth taxes and maybe transfers to the provinces for daycare and senior’s facilities. Certainly, the environment will take on a different priority than currently declared by the Liberal government if the Conservatives win a June 2021 (approximately) election.
All this being said, it is important that Canada not panic, that we do not try to re-open the economy too quickly because a significant second wave of COVID-19 will force lockdown, require even more government expenditures (and debt), stall growth, and harm the most vulnerable (again). If all of this comes to pass, an election is likely in June 2021. However, a day is a long time in politics. Nine months to a year from now is an eternity.
*Viewpoints and opinions expressed in this posting are those of the author and not necessarily those of the New Westminster Chamber of Commerce nor of Integrated Analytics & Research Ltd.
Many people are stocking up on supplies and with good reason. While panic is not warranted, prudent preparation is. The economic impact of this pandemic will be painful for many people, but the small businesses who are just getting by may be the hardest hit. There will likely be a desire for many families to isolate themselves and this could have a disastrous effect on our local economy.
Our request is that, if you need to shop, we ask you to consider supporting your local small business.
Our community is better when it is full of thriving and vibrant small businesses. They are the ones who support your lacrosse or baseball team and the ones whose families go to local restaurants and shops.
Please consider them in the coming weeks and months as the response to COVID-19 unfolds.
Coming together as a community
In times of uncertainty there is a tendency for people to isolate themselves and especially considering the implications of being together. This pandemic, and its financial implications will cause many people a significant amount anxiety and stress for people.
As a community we have a choice about how this will affect us, now and in the coming weeks and months. We may not see each other face to face as much as we used to, but that doesn’t mean that people don’t need social contact. It is critical for mental health and well being and an important factor in mitigating anxiety, stress and overwhelm.
We at the chamber encourage you to stay connected with the people you care about through encouraging messages and regular check ins via phone, skype, or other means.. When we fail, we tend to fail alone. There are a lot of elements of the current situation which we have no control over but if we follow the advice of the health professionals, we will get through this.
Also, if we continue to support each other as the financial impacts begin to show themselves, we can make sure that no one gives in to despair, and that when we get to the other side of this crisis, we are a stronger community for it.
What public facing businesses can do
Public Health officials continue to advise that the risk of infection in Canada remains low but the public is worried. Show that you are taking steps to protect the health of customers and employees.
Step 1 – Take these actions
1. Have hand sanitizer available for your customers.
2. Regularly disinfect surfaces, especially commonly touches surfaces like door knobs. Here is a link on how to clean to prevent the spread of the flu. https://www.cdc.gov/flu/school/cleaning.htm3. Make sure that your staff is regularly washing their hands with soap for 20 seconds.
4. Instruct your staff to stay home if they are sick.
Step 2 – Make sure your customers know you are taking these actions
1. Print and post signs in your store explaining the steps you are taking to protect their health
2. Be seen to be taking the steps (like cleaning surfaces while customers are in the store)
3. Communicate on social media the steps you are taking
Step 3 – Get Creative
Explore ways to limit exposure for your customers. Could you do a pick up service where people phone in and you get their order ready for them and they just have to pick it up? Is delivery possible by harnessing Uber, Lyft or your staff? Can you partner with a neighbouring restaurant to harness their delivery service?
As the saying goes necessity is the mother of invention. There may, in fact, be little you can do depending on your circumstances, but just because the answer isn’t obvious, doesn’t mean it isn’t there. Harness the collective intelligence of your staff and see if there are ANY actions you can take to mitigate the impact of COVID-19on your business.
As always, your Chamber of Commerce remains committed to helping the business community. Please feel free to reach out to us for links to sources of credible information regarding COVID-19, links to resources, and/or to share your concerns and best practices.
We are closely monitoring the ongoing conditions of the COVID-19 virus and associated economic impact and we take the health and safety of our members seriously. At the time of posting this statement, the Public Health Agency of Canada has assessed the public health risk associated with COVID-19 as low for Canada, with continued reassessment as new information becomes available.
Regardless of external events that arise, it is best to be proactive and have a plan. We have compiled the following resources and links to support your business planning.
Be informed with the most current information on COVID-19 please visit:
Whether it is a public health issue, natural disaster, or other emergencies, it is important to be prepared and ensure you have an up-to-date business continuity and disaster recovery plan. Here are some other resources to assist you in your planning.
We continue to welcome guests to our events. However, based on the recommendations from health officials, please do not attend events if you are feeling sick or have recently returned from an affected area. In addition, consider not attending if you have underlying health conditions that may be impacted by a respiratory illness. Current event status.
Hey New West! Spring break is in a handful of sleeps. What do you have planned for March 18th to 29th?
Kids everywhere rejoice over the blank calendar over spring break, only to develop cases of cabin fever at home. This is the week parents have to add restless kids to their schedule of getting their regular errands done. Plans to fill their calendar? We’ve got some ideas.
We chatted with our neighborhood businesses and gathered a handful of activity inspirations for you. Explore, below (and don’t forget to tag us in your photos for a share!)
There will be two weeks of exciting, creative fun at Anvil Centre and Irving House this March!
Week 1 (March 18 – 22)
The Anvil Centre is running Creative Sparks, a full-day, full-week camp for kids ages 4 to 12. The Anvil Centre Arts and Heritage programs focus on skill-building and creative expression.
Children rotate through classes taught by dedicated professionals within their fields. These trained instructors encourage and support process and inquiry based learning through material manipulation and experimentation, guided projects and play. Classes include Theatre Basics, Drawing & Cartooning, Creative Movement, and Printmaking.
The New Westminster Museum and Archives and the New Media Gallery will also be providing tours and accompanying activities!
For kids 12 to 14, New Westminster’s historic Irving House has workshops on Traditional Hand Sewing Made Easy. All growing kids should learn skills to extend the life of their clothes!
Week 2 (March 25 – 29)
The second week opens up more choices for families as they showcase an exciting variety of morning and afternoon day camps. Theatre, music, painting, drawing, game coding and cartooning camps are available for a range of ages.
At Irving House there will be two more fantastic heritage-themed camps available for children 5 to 8 years: Crafts from Around the World and Spring Garden Crafts.
For more information call: 604-527-4640 or click here for their Spring Break Brochure and here to register online.
Run away and join the circus with high flying Aerial Silks, beyond bouncy Trampolines, gloriously goofy Juggling Props, and more! These unique day camps at the Vancouver Circus School are geared towards youth ages 6 to 16, and welcome all fitness levels and abilities.
Throughout the camp, students learn and develop skills rehearsing for the Big Show at the end of the week. Parents, family and friends are invited to share in the achievements of all their little daredevils, acrobats, and little aerialists as they showcase their week of fun and adventure at the circus!
Plus, if you register one child, you receive 20% off all additional children! For scheduling, pricing, and registration, click here!
The River Market offers the future Etsy store owner their first step into the basics of soap making! Drop-in days available 5 times a week.
If your kid prefers detailed work with a brush, there are also ceramic painting classes like Painted Pots & Polka Dots with Pottery Works, or Faerie Door Painting with The Wylde Wood Collective.
Even if they’re not a future software developer, Code Club offers a fun and interactive way for children to build valuable life skills such as logical thinking, teamwork and collaboration skills. Their biweekly classes engaging kids in learning more about the technology they use every day!
If you don’t really want your kids sitting in front of a screen more than they already do, consider the Board Game Meetup. This is a free all-ages meetup, not a class, but there will be people happy to teach!
The City of New Westminster’s Spring Break Brochure shares some one-of programs all throughout the week, including CPR/AED Training, Dance, Sports, Cooking, and Wrestling classes. Their brochure also includes other weeklong camps, such as Babysitter Training, Video Game Design, Drones, Illusions and Magic, and Art classes.
You deserve a break too:
Open Mic Night at Judge Begbie’s Tavern. Stop by for some drinks, appies, and entertainment!
If comedy is more up your alley, check out Lafflines Comedy Club for their upcoming shows here.
If you feel like treating yourself, El Santo is having a Chef’s Table Dinner. To reserve your spot for this special six course dinner, click here. If not, they have happy hour specials every day of the week!
Check out rest of Downtown New West’s activities on their calendar here.
New Westminster Chamber of Commerce is a non-partisan business
organization that exists to meet the needs of the business community.
#201 - 309 Sixth St
New Westminster, BC V3L 3A7