Earlier this week, Canada passed an unprecedented relief package designed to minimise the impact of the coronavirus pandemic. Legislation worth $107 B CAD received Royal Assent on Wednesday, following a dramatic rise in unemployment benefits claims.
While no economy is expected to fare particularly well in the coming months, Canada is more prepared and less affected than many other nations—thanks in part to the early implementation of a travel ban. Canada took decisive action shutting its borders at an earlier stage than any other first-world nation, owing largely to the country’s ability to analyse the effectiveness of measures taken by other countries much further along the infection curve.
Data shows Canada trailing behind the United Kingdom, and other European countries, quite significantly. As of March 26, Canada had 3,579 confirmed cases, 36 deaths, 35 in critical condition, and an infection rate of 95 per million people.
Compare this to the United Kingdom’s 9,849 cases, 477 deaths, 163 critical cases, and an infection rate of 145 per million people, and it is clear that Canada has valuable days and weeks to learn from the actions of other first-world countries. This is a huge advantage for the Canadian government and people, and beyond the travel ban implementation, it is giving the nation’s leaders valuable insights into what economic measures do and don’t work.
We have witnessed this both in the government’s direct cash stimulus offer to the Canadian people, and the announcement by Canadian banks that they will offer mortgage payment relief to those previously in good standing.
In the United Kingdom, Chancellor Rishi Sunak announced sweeping measures to protect British workers by offering every employed person 80 percent of their monthly salary up to a value of £2,500 GBP. Over recent weeks, the United States Congress bickered over legislation that would offer American citizens a one-time cheque for $1,200 USD. Canada, having bought time with an early travel ban, saw these two directions and chose to offer citizens a monthly stipend of $2,000 CAD. This, in my view, was a wise decision.
The move by Canadian banks to offer an indefinite period of mortgage repayment relief is also both welcome and wise. On March 17, the Bank of Nova Scotia, Toronto-Dominion Bank, and the Royal Bank of Canada all announced that anyone in good standing could apply for repayment deferrals on mortgages, with additional interest on owed sums being added to monthly repayments once they resume. It mirrors a move pushed by the Financial Conduct Authority (FCA) in the UK, which told lenders they must offer three-month payment holidays for UK homeowners.
A major difference in strategy, however, was that the FCA insisted all lenders must not investigate the circumstances of those applying for the relief and should apply the policy universally to all borrowers. In Canada, however, those who have experienced recent financial difficulty or defaulted on loan payments in the months leading up to the coronavirus pandemic would not be eligible. Clearly this doesn’t make very much sense. It is a major failing, and one that has not been addressed by the Canadian government so far.
Canada is likely to face much of the same challenges as Italy, the United Kingdom, and even the United States. In just one week, more than 1,000,000 Canadian workers filed for unemployment benefits. 5,000 people alone were laid off by Air Canada—an unfortunate casualty of the travel bans.
However, with the borders under control, social distancing measures put into place, and the ability to build on learned experience from overseas, the government, banks, and major employers have the best possible chance to minimize the impact the virus has on the economy.
Canada also has the added benefit of testing kits, including antibody tests that identify those who have already suffered asymptomatically, being available before the country gets close to peak infection rates. On March 18, Canada’s Health Minister announced plans to expedite orders of two new diagnostic tests that speed up testing of coronavirus patients. Canada is extremely well-positioned to handle this pandemic more efficiently than much of Europe.
Nonetheless, the Royal Bank of Canada predicts the economy will contract in the second and third quarters of the year, initially by 2.5 percent, and later by 0.8 percent. With businesses closing and millions out of work, uncomfortable action must be taken by the government now—and while it’s all far from ideal, the government is in the best possible position to do so. Canada has a world of economies to look to and learn from, not just in Europe but in the United States where the President is considering drastic measures to reopen the economy by Easter.
Continuous cash aid to Canadian citizens, mortgage repayment relief, and closed borders are signs that the government is acting responsibly. But more could still be done to ensure lenders don’t just offer these deals to those who only recently fell into financial hardship.
The Canadian government doesn’t have much of an excuse to get this wrong.
Jack Buckby is a research associate with the Frontier Centre for Public Policy and a British author and researcher, with experience working in English, American, Canadian and Polish media. His last book, Architects of Betrayal, explores the disastrous EU exit withdrawal negotiations under the leadership of Prime Minister Theresa May.