As expected, the Bank of Canada kept its interest rate target unchanged at 0.5 percent today. The press release (which, as one commentator has noted, is unusually short) depicts an economy still facing uncertainty from global developments, especially in the United States. Low interest rates are supporting steady growth in consumer spending and the housing sector, and there are some signs of an improvement in business investment. Inflation -- both headline CPI and the Bank's three core measures -- remains well-contained.
Given these facts, it's no surprise that the Bank's Governing Council "judges that the current degree of monetary stimulus is appropriate at present". And likely not just "at present": the timetable for any removal of stimulus continues to be pushed further into the future, even though this implies that the divergence between the Bank's policy stance and that of the Federal Reserve will continue to widen.
Meanwhile, back in the housing market....It's too soon to tell whether recent actions by the Ontario government will help to cool the buying frenzy in the Toronto area, though there are some early signs that the bidding wars have eased. However, the overhang of household debt continues to loom ominously. Manulife is the latest institution to weigh in, as reported here.
Much of this is familiar, but there's one startling statistic: 72 percent of mortgage holders could not absorb a 10 percent increase in their monthly mortgage costs without running into financial problems. Indeed, 38 percent would be in trouble with a 5 percent increase! Think about that. Rates have been so low for so long that most of those people are probably paying something near a 3 percent mortgage rate. That means that just one 25 basis point increase would be enough to push a sizable number of homeowners into financial distress.
That certainly shows why the Bank of Canada will need to be cautious when it does start to tighten its policy settings. But it also begs the question: just why has the Bank allowed this situation to develop, and just how does it think it can get out of it without torpedoing the entire economy?
The Bank's next policy decision, due on July 12, will be accompanied by an updated Monetary Policy Report. This will doubtless provide a detailed review of the economic outlook, but it is very unlikely to provide any clear pathway for the Bank to extricate itself from the low-rate trap it has created for itself.
Wednesday, 24 May 2017
Friday, 19 May 2017
Inappropriate
The snappy catchphrase of the month here in Canada is "cultural appropriation". In case you live in a less politically correct jurisdiction, this refers to a situation in which a member of the dominant culture (in Canada's case, white people) uses the culture of a minority in a way that can be considered disrespectful.
The specific point at issue here is an article in the Canadian Writers Union magazine's annual issue for indigenous authors*. The (white) editor of the magazine decided this was a fine opportunity to declare that he didn't actually believe in cultural appropriation, and half in jest suggested a prize should be awarded to the best appropriator. Cue uproar from indigenous writers and others from minority communities.
Over at the Toronto Star, they've been firing actual journalists (you know, the kind that go out and report on news stories) almost on a weekly basis, but they still keep a large number of columnists on staff. These people are always quick to upbraid all and sundry for racism, anti-semitism, homophobia and the like, and one or two of them duly started to weigh in on cultural appropriation. Then it seemed to occur to someone at the Star that having its columnists speak out for indigenous people about cultural appropriation might itself be considered a form of cultural appropriation, so actual indigenous voices were sought out to express their views.
This controversy, such as it is, may run for some time, but the best analysis I've seen appeared in today's issue of the Star -- this article, written by the definitely non-indigenous Rick Salutin. People who despise the concept of cultural appropriation, such as the increasingly unhinged Mark Steyn, tend to fall back on one argument: "the minute you have to state something so butt-numbingly obvious as that Shakespeare wasn't a Prince of Denmark or a Moor of Venice, you've lost". Alongside some other good points, Salutin has the perfect response to that.
* As it happens, one major Canadian novelist who has written from an indigenous perspective, Joseph Boyden, has recently had his claims to native heritage pretty effectively debunked. But that's another story.
The specific point at issue here is an article in the Canadian Writers Union magazine's annual issue for indigenous authors*. The (white) editor of the magazine decided this was a fine opportunity to declare that he didn't actually believe in cultural appropriation, and half in jest suggested a prize should be awarded to the best appropriator. Cue uproar from indigenous writers and others from minority communities.
Over at the Toronto Star, they've been firing actual journalists (you know, the kind that go out and report on news stories) almost on a weekly basis, but they still keep a large number of columnists on staff. These people are always quick to upbraid all and sundry for racism, anti-semitism, homophobia and the like, and one or two of them duly started to weigh in on cultural appropriation. Then it seemed to occur to someone at the Star that having its columnists speak out for indigenous people about cultural appropriation might itself be considered a form of cultural appropriation, so actual indigenous voices were sought out to express their views.
This controversy, such as it is, may run for some time, but the best analysis I've seen appeared in today's issue of the Star -- this article, written by the definitely non-indigenous Rick Salutin. People who despise the concept of cultural appropriation, such as the increasingly unhinged Mark Steyn, tend to fall back on one argument: "the minute you have to state something so butt-numbingly obvious as that Shakespeare wasn't a Prince of Denmark or a Moor of Venice, you've lost". Alongside some other good points, Salutin has the perfect response to that.
* As it happens, one major Canadian novelist who has written from an indigenous perspective, Joseph Boyden, has recently had his claims to native heritage pretty effectively debunked. But that's another story.
Thursday, 18 May 2017
Better late than never
The best that can be said for the Bank of Canada's low interest rate/low dollar policy is that without it, things might have been worse over the past decade. It's not as though the Bank's stance has produced strong growth in investment or exports, but at least the economy has for the most part stayed out of recession.
The worst that can be said about that same policy is that it has driven a boom in consumer debt and house prices that cannot be sustained indefinitely. The Canadian household debt/income ratio stands at an all-time high of 167%, which is higher than the peak reached by the (not exactly comparable) US ratio just before the financial crisis. The well-publicized problems now being experienced by the higher-risk mortgage lender Home Capital may be an early indication that the bubble may be about to pop.
A few people, including your humble correspondent, have been saying for years that the Bank of Canada needed to start signalling, and then start implementing, a change of course. Now we read in the Financial Post that "some economists fret about a rapid rise in domestic house prices after eight years of rock bottom borrowing costs".
One of the quoted economists, David Rosenberg, used to work at Royal Bank of Canada, while the other, Krishen Rangasamy, is with National Bank, Canada's sixth-largest lender. This definitely counts as progress. Even as the Toronto housing market has blasted off into the stratosphere, bank economists have tended to focus on speculation, foreign buying, lack of supply and so on as the causes of the boom, downplaying the obvious impact of Bank of Canada policy.
Most galling of all, many economists have tried to argue that the growth in household debt burdens is not a problem because household assets (i.e. the value of the homes themselves) have also been rising, as if the two sides of the balance sheet -- the ultra-cheap debt and the soaring house prices -- were completely unrelated. This is nonsensical. House prices will inevitably stall out and reverse at some point, but that won't reduce the debt burden; a lot of homeowners will quickly find themselves "upside down", as our American friends refer to it when the mortgage is worth more than the house.
But even if house prices don't correct, the debt burden poses an enormous risk to the economy. Even without any policy signals from the Bank of Canada, mortgage rates have been creeping up as domestic banks find their funding costs rising, in response to developments south of the border. Survey after survey shows that the proportion of Canadian households that would be in immediate trouble if the missed even one paycheck is rising inexorably.
Raising rates is not a risk-free strategy for the Bank of Canada, not least because it would immediately start to push some of the most-indebted households over the edge. However, continuing to do nothing is surely even riskier, because in the absence of some sort of shot across the bows, many households will continue to pile up debt, making the correction all the more painful when it finally comes. The chances that the Bank will pay attention to David Rosenberg et al are still very slight, but I hope that won't discourage them from continuing to speak out.
The worst that can be said about that same policy is that it has driven a boom in consumer debt and house prices that cannot be sustained indefinitely. The Canadian household debt/income ratio stands at an all-time high of 167%, which is higher than the peak reached by the (not exactly comparable) US ratio just before the financial crisis. The well-publicized problems now being experienced by the higher-risk mortgage lender Home Capital may be an early indication that the bubble may be about to pop.
A few people, including your humble correspondent, have been saying for years that the Bank of Canada needed to start signalling, and then start implementing, a change of course. Now we read in the Financial Post that "some economists fret about a rapid rise in domestic house prices after eight years of rock bottom borrowing costs".
One of the quoted economists, David Rosenberg, used to work at Royal Bank of Canada, while the other, Krishen Rangasamy, is with National Bank, Canada's sixth-largest lender. This definitely counts as progress. Even as the Toronto housing market has blasted off into the stratosphere, bank economists have tended to focus on speculation, foreign buying, lack of supply and so on as the causes of the boom, downplaying the obvious impact of Bank of Canada policy.
Most galling of all, many economists have tried to argue that the growth in household debt burdens is not a problem because household assets (i.e. the value of the homes themselves) have also been rising, as if the two sides of the balance sheet -- the ultra-cheap debt and the soaring house prices -- were completely unrelated. This is nonsensical. House prices will inevitably stall out and reverse at some point, but that won't reduce the debt burden; a lot of homeowners will quickly find themselves "upside down", as our American friends refer to it when the mortgage is worth more than the house.
But even if house prices don't correct, the debt burden poses an enormous risk to the economy. Even without any policy signals from the Bank of Canada, mortgage rates have been creeping up as domestic banks find their funding costs rising, in response to developments south of the border. Survey after survey shows that the proportion of Canadian households that would be in immediate trouble if the missed even one paycheck is rising inexorably.
Raising rates is not a risk-free strategy for the Bank of Canada, not least because it would immediately start to push some of the most-indebted households over the edge. However, continuing to do nothing is surely even riskier, because in the absence of some sort of shot across the bows, many households will continue to pile up debt, making the correction all the more painful when it finally comes. The chances that the Bank will pay attention to David Rosenberg et al are still very slight, but I hope that won't discourage them from continuing to speak out.
Wednesday, 10 May 2017
Short story
I haven't written about the short-selling of stocks here for a long time -- probably since the financial crisis was at its peak. Now it seems that the short sellers are back to their nefarious business in Canada again, looking to bring down Home Capital, a higher-risk mortgage lender.
The elevated level of risk in the Canadian housing market, particularly in areas around Toronto and Vancouver where an out-and-out bubble has developed, has become an international story. Bubbles almost always end badly. There are grave doubts as to whether the steps taken to cool the market by the BC provincial government (last year) or the Ontario government (last month) can be effective, given that the Bank of Canada seems set on maintaining its ultra-low interest rate policy.
If the bubble is indeed going to burst, the first sign of danger will always be a problems at a higher-risk lender. This was the case in the UK a decade ago, with Northern Rock, and it was the case also in the United States with Countrywide and others. Home Capital is one of the larger higher-risk mortgage lenders in Canada, and in the last few months it has made a number of unfortunate mis-steps. In essence, the company realized some months ago that some of the mortgage brokers feeding its business had not been fully disclosing the financial situation of the borrowers they were introducing.
Since then, as this article by Terence Corcoran in the National Post explains, it's been all downhill for Home. The Ontario Securities Commission has become involved, there has been a management and board shake-up, and depositors have started to get cold feet and withdraw their funds, creating a liquidity problem. Most ominous of all, short-sellers have become actively involved, although as Corcoran notes, it's all but impossible to discover just how big the short positions are.
Matters seem to be coming to a head. Last week Home arranged a large line of credit at a very fancy interest rate -- 22 percent! -- with a consortium of non-bank lenders. This week it has announced a deal for an unnamed buyer to take over a portion of its mortgage book, and also announced its intention to re-orient its entire business model. To reduce funding pressures, it will focus on sourcing mortgages that can be packaged for sale rather than kept on the company's own books.
It remains to be seen whether this will be enough. It may at least permit an orderly wind-down of the business, rather than a sudden collapse that could put the entire financial system under strain. In the meantime, it's appropriate to ask again just what value short sellers bring to the market in these (or any other) circumstances. When even a right-winger and ardent free-marketeer like Terence Corcoran is all but accusing the shorts of pushing Home into bankruptcy with no regard for the wider consequences, maybe the regulatory authorities need to take a fresh look at the whole pernicious practice.
The elevated level of risk in the Canadian housing market, particularly in areas around Toronto and Vancouver where an out-and-out bubble has developed, has become an international story. Bubbles almost always end badly. There are grave doubts as to whether the steps taken to cool the market by the BC provincial government (last year) or the Ontario government (last month) can be effective, given that the Bank of Canada seems set on maintaining its ultra-low interest rate policy.
If the bubble is indeed going to burst, the first sign of danger will always be a problems at a higher-risk lender. This was the case in the UK a decade ago, with Northern Rock, and it was the case also in the United States with Countrywide and others. Home Capital is one of the larger higher-risk mortgage lenders in Canada, and in the last few months it has made a number of unfortunate mis-steps. In essence, the company realized some months ago that some of the mortgage brokers feeding its business had not been fully disclosing the financial situation of the borrowers they were introducing.
Since then, as this article by Terence Corcoran in the National Post explains, it's been all downhill for Home. The Ontario Securities Commission has become involved, there has been a management and board shake-up, and depositors have started to get cold feet and withdraw their funds, creating a liquidity problem. Most ominous of all, short-sellers have become actively involved, although as Corcoran notes, it's all but impossible to discover just how big the short positions are.
Matters seem to be coming to a head. Last week Home arranged a large line of credit at a very fancy interest rate -- 22 percent! -- with a consortium of non-bank lenders. This week it has announced a deal for an unnamed buyer to take over a portion of its mortgage book, and also announced its intention to re-orient its entire business model. To reduce funding pressures, it will focus on sourcing mortgages that can be packaged for sale rather than kept on the company's own books.
It remains to be seen whether this will be enough. It may at least permit an orderly wind-down of the business, rather than a sudden collapse that could put the entire financial system under strain. In the meantime, it's appropriate to ask again just what value short sellers bring to the market in these (or any other) circumstances. When even a right-winger and ardent free-marketeer like Terence Corcoran is all but accusing the shorts of pushing Home into bankruptcy with no regard for the wider consequences, maybe the regulatory authorities need to take a fresh look at the whole pernicious practice.
Friday, 5 May 2017
Canada employment data: jobs -- OK; wages -- not OK
While the US labour force survey for April showed a smart bounceback in job creation, the Canadian data were more mixed. Although the unemployment rate ticked down to a nine-year low of 6.5 percent, that improvement was entirely due to a fall in labour force participation, with younger people in particular seemingly giving up on the search for jobs. The economy added only 3200 jobs in the month, well inside the survey's margin of error.
Still, as StatsCan noted in its commentary, the economy has added 276,000 jobs over the past year, a 1.5 percent increase. Not bad at all, but.....first, the vast majority of the new jobs have been part-time in nature, so that total hours worked in the economy have only grown by 1.1 percent in the last twelve months. Second, and potentially more significant, wage growth is lagging badly. Hourly earnings rose less than 0.7 percent in the year to April, the lowest recorded increase in the series since at least 1998.
This is an extraordinarily low figure for this stage of the business cycle. It may in part explain why the household debt/income ratio has been rising steadily -- the problem may be less with the numerator than with the denominator. More importantly, with inflation (CPI) currently at 1.6 percent, real household incomes are under downward pressure, which militates strongly against steady growth in household consumption.
The employment data come in the wake of an earlier StatsCan report that real GDP was unchanged in February after three straight monthly gains. The immediate analyst take on this was that the economy was due for a "breather", even though nobody had actually seen it coming. International trade data for March were remarkably strong, with exports rising to an all-time record; this should underpin some recovery in the monthly GDP data for the month and ensure a positive result for the first quarter as a whole.
Even so, if wages and household incomes remain stagnant or worse, it is difficult to see how the overall economy can remain on a stable growth path. Today's US employment data put a Fed rate hike in June firmly on the agenda; the Bank of Canada will not be following suit for many months yet.
Still, as StatsCan noted in its commentary, the economy has added 276,000 jobs over the past year, a 1.5 percent increase. Not bad at all, but.....first, the vast majority of the new jobs have been part-time in nature, so that total hours worked in the economy have only grown by 1.1 percent in the last twelve months. Second, and potentially more significant, wage growth is lagging badly. Hourly earnings rose less than 0.7 percent in the year to April, the lowest recorded increase in the series since at least 1998.
This is an extraordinarily low figure for this stage of the business cycle. It may in part explain why the household debt/income ratio has been rising steadily -- the problem may be less with the numerator than with the denominator. More importantly, with inflation (CPI) currently at 1.6 percent, real household incomes are under downward pressure, which militates strongly against steady growth in household consumption.
The employment data come in the wake of an earlier StatsCan report that real GDP was unchanged in February after three straight monthly gains. The immediate analyst take on this was that the economy was due for a "breather", even though nobody had actually seen it coming. International trade data for March were remarkably strong, with exports rising to an all-time record; this should underpin some recovery in the monthly GDP data for the month and ensure a positive result for the first quarter as a whole.
Even so, if wages and household incomes remain stagnant or worse, it is difficult to see how the overall economy can remain on a stable growth path. Today's US employment data put a Fed rate hike in June firmly on the agenda; the Bank of Canada will not be following suit for many months yet.
Wednesday, 3 May 2017
Aussie rules
Why are house prices in Toronto continuing to soar? They were up 31 percent in the year to April. Some point the finger at foreign buyers, shifting their attention from Vancouver after the BC Provincial government imposed a special tax to cool the market there. Some blame domestic speculators. Some blame a lack of supply of new homes, which is in turn attributed to zoning regulations. And underlying all of these is the rock-bottom interest rate policy still adhered to by the Bank of Canada, almost a decade on from the financial crisis.
There's another culprit that doesn't get much mention, but maybe should: the machinations and sheer venality of realtors. Time was, a seller would hire an agent and put the house up for sale at a price that was realistic or maybe slightly ambitious. The realtor would put the home on the Multiple Listing Service (MLS) so that other realtors could have a crack at selling it for a portion of the commission. Then a buyer would come along with an offer at or maybe below the asking price, there'd be a bit of to-and-fro'ing, and a deal would be struck.
That's still how it goes in much of the country, but in Toronto the system has been turned on its head. Homes are now routinely listed at a price well below what the seller and realtor hope to achieve. A fixed date is set for bids to be tabled. On the specified date, the realtor and seller review the bids and strike a deal with the highest bidder. Here's the thing: none of the bidders knows what anyone else is prepared to pay. It's quite possible to outbid the next best buyer by tens of thousands of dollars, and hence end up paying far more than the seller would in fact have been prepared to settle for.
It's self-evidently a wildly unfair approach, but is there a better alternative? Today's Toronto Star suggests one: the open auction system used in Australia, as explained by a former Australian realtor now living in Canada. The system basically sees a short marketing period for the house that's being sold, after which interested buyers assemble, customarily at the house itself, and bid openly against each other until a winner emerges. It's all transparent and sensible. It would not necessarily prevent house price bubbles, especially in an ultra low rate environment, but it would ensure that buyer and seller in each transaction entered into the deal with full information to hand.
The Star reporter asks the Aussie realtor an obvious question: why hasn't Canada moved to a more open auction system? The reply in part: "It's a bit of a head-scratcher for people here. It's agents that don't get it as much as anything". Oh, the agents get it all right, and the key thing that they get is revealed in response to an earlier question: "The seller pays the agent a percentage -- usually 0.5 percent to 1 percent -- of the anticipated value of the home to market and stage the property and hold open houses".
"0.5 percent to 1 percent"! Real estate commissions in Toronto are customarily in the area of 5 percent -- which, considering how little effort is needed to sell a home in the city these days, is money for nothing. It's no wonder the number of real estate agents in Toronto has been expanding rapidly in recent years, and it's no wonder that the industry strenuously defends the flawed system that's in place.
When I returned to Canada a few years ago, I met a local realtor at a social function and got talking about the recent sale of our home in the UK. The realtors there had compiled and published a colour brochure on the property in less than a day and sold the property, after two competing offers, in three days flat. And for this we were charged a fee of 1.25 percent. I thought the Canadian realtor was going to stuff a canape down my throat to make sure nobody else heard that. Low fee realtors exist in Canada, but they never make much inroads against the established big boys of the industry. Aussie rules would be a good idea, but is a change a'gonna come? I highly doubt it.
There's another culprit that doesn't get much mention, but maybe should: the machinations and sheer venality of realtors. Time was, a seller would hire an agent and put the house up for sale at a price that was realistic or maybe slightly ambitious. The realtor would put the home on the Multiple Listing Service (MLS) so that other realtors could have a crack at selling it for a portion of the commission. Then a buyer would come along with an offer at or maybe below the asking price, there'd be a bit of to-and-fro'ing, and a deal would be struck.
That's still how it goes in much of the country, but in Toronto the system has been turned on its head. Homes are now routinely listed at a price well below what the seller and realtor hope to achieve. A fixed date is set for bids to be tabled. On the specified date, the realtor and seller review the bids and strike a deal with the highest bidder. Here's the thing: none of the bidders knows what anyone else is prepared to pay. It's quite possible to outbid the next best buyer by tens of thousands of dollars, and hence end up paying far more than the seller would in fact have been prepared to settle for.
It's self-evidently a wildly unfair approach, but is there a better alternative? Today's Toronto Star suggests one: the open auction system used in Australia, as explained by a former Australian realtor now living in Canada. The system basically sees a short marketing period for the house that's being sold, after which interested buyers assemble, customarily at the house itself, and bid openly against each other until a winner emerges. It's all transparent and sensible. It would not necessarily prevent house price bubbles, especially in an ultra low rate environment, but it would ensure that buyer and seller in each transaction entered into the deal with full information to hand.
The Star reporter asks the Aussie realtor an obvious question: why hasn't Canada moved to a more open auction system? The reply in part: "It's a bit of a head-scratcher for people here. It's agents that don't get it as much as anything". Oh, the agents get it all right, and the key thing that they get is revealed in response to an earlier question: "The seller pays the agent a percentage -- usually 0.5 percent to 1 percent -- of the anticipated value of the home to market and stage the property and hold open houses".
"0.5 percent to 1 percent"! Real estate commissions in Toronto are customarily in the area of 5 percent -- which, considering how little effort is needed to sell a home in the city these days, is money for nothing. It's no wonder the number of real estate agents in Toronto has been expanding rapidly in recent years, and it's no wonder that the industry strenuously defends the flawed system that's in place.
When I returned to Canada a few years ago, I met a local realtor at a social function and got talking about the recent sale of our home in the UK. The realtors there had compiled and published a colour brochure on the property in less than a day and sold the property, after two competing offers, in three days flat. And for this we were charged a fee of 1.25 percent. I thought the Canadian realtor was going to stuff a canape down my throat to make sure nobody else heard that. Low fee realtors exist in Canada, but they never make much inroads against the established big boys of the industry. Aussie rules would be a good idea, but is a change a'gonna come? I highly doubt it.
Friday, 28 April 2017
Let the bribery begin
A Provincial election here in Ontario is not due until the Spring of 2018. However, the ruling Liberals, and particularly their leader Kathleen Wynne, are in such dire straits in the opinion polls that they are making an early start on trying to win back the voters with new giveaways. Yesterday's budget was choc-a-bloc with goodies, at least one of which was actually a good idea.
Finance Minister Charles Sousa is in the happy position of announcing that the budget will be balanced this year and for the next two years, after a string of deficits stretching back all the way to 2008. Most of the credit for the improvement belongs to the Ontario economy, which is now leading Canada (and all of North America) in terms of growth, after several particularly dire years. It should be kept in mind that, balance or not, Ontario is the most indebted sub-national jurisdiction in the world. Still, there's an election to be won, and the fiscal improvement paved the way for the handouts showered upon the citizenry by Sousa yesterday.
A transit tax break for seniors, more day care spaces, rising spending on hospitals, and on and on the list goes. The one item that looks like something good, or at least the start of something good, is the plan to make prescription drugs free for the under-25s. Uniquely among countries with public health care systems, Canada does not offer any drug benefits, except to senior citizens. This is ludicrous: it means that many people visit their GP (for free) but then receive a prescription that they cannot afford to fill. Thus the GP's time has been wasted and the patient is no better off.
There's an element of cynicism about the Liberals' approach. Under-25s are generally not big users of prescription medications, so the estimated cost of the new plan is a modest C$ 465 million. Intriguingly, the opposition NDP promised early this week that it would introduce a pharma-care plan if it won the election next year, with a very similar cost. Its plan would be available to all Ontarians regardless of age, but would only cover the 125 most-often-prescribed medications. It's not clear which approach the electorate would favour -- my money would be on the NDP -- but one way or another, pharma-care is coming to Ontario, and that's a good thing.
Are there any losers? Yes -- Toronto. Mayor John Tory, as always, is mooching for handouts for an array of projects that he won't ask the city's own citizens to pay for: refurbishment of public housing, transit lines, a glitzy downtown park built over the railway tracks. The Province (and the Federal government) have shoveled huge amounts of money Tory's way in the last couple of years, but there was nothing new for the city yesterday. That's risky for Wynne, given that her party traditionally does very well with Toronto area voters. If polls show the budget is not helping to revive the party's fortunes, we can confidently expect Sousa to conjure up some more money from somewhere to buy those voters back.
And what does all this imply for the election? Wynne, as usual, is moving onto the more left-leaning NDP's turf here. That's risky. Voters unwilling to be bribed with their own money may rally around the Tories, who are well ahead in the opinion polls. One problem there: the Tory party and its young but slightly sinister leader Patrick Brown have even fewer detailed policy positions than Donald Trump. As long as voters hate Wynne as much as they do now, that won't matter, but yesterday marks the start of the Liberals' full court press to reverse their fortunes.
Finance Minister Charles Sousa is in the happy position of announcing that the budget will be balanced this year and for the next two years, after a string of deficits stretching back all the way to 2008. Most of the credit for the improvement belongs to the Ontario economy, which is now leading Canada (and all of North America) in terms of growth, after several particularly dire years. It should be kept in mind that, balance or not, Ontario is the most indebted sub-national jurisdiction in the world. Still, there's an election to be won, and the fiscal improvement paved the way for the handouts showered upon the citizenry by Sousa yesterday.
A transit tax break for seniors, more day care spaces, rising spending on hospitals, and on and on the list goes. The one item that looks like something good, or at least the start of something good, is the plan to make prescription drugs free for the under-25s. Uniquely among countries with public health care systems, Canada does not offer any drug benefits, except to senior citizens. This is ludicrous: it means that many people visit their GP (for free) but then receive a prescription that they cannot afford to fill. Thus the GP's time has been wasted and the patient is no better off.
There's an element of cynicism about the Liberals' approach. Under-25s are generally not big users of prescription medications, so the estimated cost of the new plan is a modest C$ 465 million. Intriguingly, the opposition NDP promised early this week that it would introduce a pharma-care plan if it won the election next year, with a very similar cost. Its plan would be available to all Ontarians regardless of age, but would only cover the 125 most-often-prescribed medications. It's not clear which approach the electorate would favour -- my money would be on the NDP -- but one way or another, pharma-care is coming to Ontario, and that's a good thing.
Are there any losers? Yes -- Toronto. Mayor John Tory, as always, is mooching for handouts for an array of projects that he won't ask the city's own citizens to pay for: refurbishment of public housing, transit lines, a glitzy downtown park built over the railway tracks. The Province (and the Federal government) have shoveled huge amounts of money Tory's way in the last couple of years, but there was nothing new for the city yesterday. That's risky for Wynne, given that her party traditionally does very well with Toronto area voters. If polls show the budget is not helping to revive the party's fortunes, we can confidently expect Sousa to conjure up some more money from somewhere to buy those voters back.
And what does all this imply for the election? Wynne, as usual, is moving onto the more left-leaning NDP's turf here. That's risky. Voters unwilling to be bribed with their own money may rally around the Tories, who are well ahead in the opinion polls. One problem there: the Tory party and its young but slightly sinister leader Patrick Brown have even fewer detailed policy positions than Donald Trump. As long as voters hate Wynne as much as they do now, that won't matter, but yesterday marks the start of the Liberals' full court press to reverse their fortunes.
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