Canada will spend big to combat coronavirus, saying now is 'not the time for austerity'

Ottawa, September 24

Canada's Liberal government, insisting on Wednesday that "this is not the time for austerity," promised major new investments and initiatives to help the country battle back from the coronavirus pandemic even as a new wave of infections looms.

The administration of Prime Minister Justin Trudeau, which has already unveiled hundreds of billions of dollars in aid for people and businesses, promised a plan to recover more than a million jobs lost during the crisis.

"This is not the time for austerity," it said. "Canada entered this crisis in the best fiscal position of its peers." The government made the commitments in the so-called Speech from the Throne, in which it outlined its plans and made clear the need to protect Canadians from COVID-19 as new cases spike, reaching 146,663 total cases and 9,234 deaths on Tuesday.

In a rare national address on Wednesday evening, Trudeau said a second wave was under way in the four biggest provinces.

"We're on the brink of a fall that could be much worse than the spring," he said. The government, he added, "will have your back, whatever it takes."

The range of promises and mentions of significant investments could upset markets showing signs of nervousness about soaring budget deficits and debt. Canada lost one of its coveted triple-A ratings in June when Fitch downgraded it for the first time, citing the spending.

The Canadian dollar extended its decline after the speech, touching 1.3384 to the US dollar, or 74.72 US cents.

In his address, Trudeau said low interest rates meant Ottawa could afford the promised spending.

"Doing less would mean a slower recovery and bigger deficits in the long run," he said, adding that long-term spending would be fiscally sustainable.

Spending measures already announced mean Canada's budget deficit this fiscal year is forecast to hit C$343.2 billion ($256.5 billion), the largest since World War Two.

Ian Lee, associate professor of management at Ottawa's Carleton University, said the speech represented a "very high-risk bet" by Trudeau.

"He's gambling this massive increase in expenditures is going to generate very substantial growth," he said by phone.

COVID-19 CASES RISING RAPIDLY

There has been an average of 1,123 cases reported daily over the past week, compared with a daily average of 380 cases in mid-August. Canadians are now more worried about COVID-19 than they have been since April, an Abacus Data poll showed.

The throne speech is a parliamentary measure of confidence and given that the Liberals only have a minority in the House of Commons, they will need the support of opposition legislators to avoid being toppled and plunging the country into an election.

The left-leaning New Democrats - who had indicated they might vote in favor - said the proposals did not offer enough support to Canadians.

Party leader Jagmeet Singh said he did not want to force an election, adding his team would take "a lot of time" to decide what to do. A formal vote is likely next month.

The Conservatives, the largest opposition group, confirmed expectations they would not back the government.

"We don't want to see more words. We need action," said deputy leader Candice Bergen.

The Trudeau government said it was sticking to the goal of fighting climate change and promised money to retrofit buildings and make zero-emissions vehicles more widely available.

The Liberals also vowed to make significant investments in childcare and said they would extend an existing wage subsidy measure until next summer. The speech made no specific spending commitments or fiscal projections, some of which will be disclosed in a fiscal update later this year. Reuters