According to a CPA Canada poll during a recent webinar, 66 per cent of respondents chose reskilling and revised income supports for Canadian workers as the number one consideration for government to help guide the economic recovery (Getty Images/Thomas Barwick)
The global economic impact of COVID-19 persists as countries struggle to restart economies hit hard by abrupt lockdowns and phased re-openings.
Since March, Canada has seen millions of jobs lost, record unemployment rates, and the largest GDP drop ever recorded. Businesses have incurred billions of dollars of debt, with some forced to shutter.
Although about 1.6 million jobs have been recovered since May—and some markets are making gains, such as in real estate, with record national home sales in July—a projected $343.2-billion deficit looms, alongside a recession threatening more losses.
The next federal budget must address these challenging economic circumstances arising out of the pandemic. And advising on just how to do that is where CPA expertise can play a role. Recognizing this, CPA Canada invited broad-based member input into Canada’s economic recovery out of the pandemic through an interactive webinar.
The webinar, Rebuilding the economy: What does Canada need for a better future?, attracted almost 1,800 attendees with insightful commentary from experts: Francis Fong, CPA Canada’s chief economist; Trevin Stratton, chief economist and vice-president of policy at the Canadian Chamber of Commerce; and Linda Nazareth, economist and host of the podcast, Work and the Future.
A live Q&A during the webinar and an online forum via CPA Canada’s digital engagement platform captured members’ views and ideas, which helped inform the organization’s pre-budget submission to the federal government, outlining recommendations on how to proceed with the economic recovery from COVID-19.
Below are some highlights from the submission:
1) BOOST LABOUR AND SKILLS
Coining it “a recession unlike any other”, CPA Canada emphasizes the pandemic’s impact on the labour force.
Certain industries, including food, retail and entertainment, and employee segments, such as women, young and low-wage workers, have been disproportionately affected. More than 60 per cent of businesses in vulnerable sectors reported losing at least one-fifth of their typical revenue, according to Statistics Canada. Meanwhile, a recent RBC study indicated that 1.5 million women lost their jobs in March and April, and only accounted for 45 per cent of job gains in May and June.
Policies moving forward must address these gaps, which are exacerbated by other factors including technological disruption, economic pressures, geo-political tensions and climate change, CPA Canada’s submission says.
“COVID-19’s impact on the Canadian economy cannot be understated … even if growth were to rebound strongly, a shock of this magnitude will take several years to recover from,” says Francis Fong, CPA Canada’s chief economist. “Many businesses will not survive this unparalleled downturn or the ‘new normal’ that will follow.”
In response, CPA Canada is calling on the government to provide Canadians with opportunities to acquire necessary future skills, while adapting to developing trends. Additionally, government needs to evolve the Employment Insurance program to align better with labour market realities. CPA members polled agree, with 66 per cent of them saying these areas should be a top consideration for government to help guide the economic recovery.
2) FOCUS ON CLIMATE CHANGE
The pandemic required an immediate response, shifting focus away from issues, such as climate change, which remains an imminent threat to our livelihoods and the economy.
In April, the World Economic Forum stressed the importance of not letting the fight against COVID-19 undermine the progress made to temper climate change, but instead have the responses work in tandem. Meanwhile, more than 350 medical groups, including several from Canada, urged the G20 leaders to align their public health and climate change efforts in COVID-19 economic recovery packages.
CPA Canada urges the government to stay focused on moving towards a low-emission, climate-smart economy, heeding recommendations from the Expert Panel on Sustainable Finance and the Taskforce on Climate-related Financial Disclosures (TCFD). This requires a long-term strategy where business and financial decisions align with Canada’s goals of having net-zero carbon emissions by 2050 and meeting its 2030 reduction target under the Paris agreement.
“Canada has set ambitious emissions reduction targets, but these targets will not be met without a plan,” says Gord Beal, CPA Canada’s vice-president of research, guidance and support. “A plan is also important to provide business with a line of sight, so they can invest and make business decisions with confidence.”
Furthermore, CPA Canada recommends the government phase in the TCFD framework within Crown corporations, federal pension funds and federally incorporated companies. And the Canada Business Corporations Act should be revised to require climate-related disclosures in annual reports.
3) STRIVE FOR A DIGITAL ECONOMY
Canada, like many countries around the world, was trying to evolve and adapt to a digital economy before COVID-19 hit, rushing in temporary setbacks.
The good news, according to the IDC Worldwide Digital Transformation Spending Guide, is that Canada’s investment in digital transformation is expected to reach $28 billion in 2020, hitting a growth rate of 7 per cent. Though down from 2019, there’s hope that growth will be back on track between 2021 and 2023.
Furthermore, the abrupt shift to remote work brought on by the pandemic has pushed government, businesses and citizens alike to embrace new technologies, accelerating this endeavour. It also revealed some of the challenges and gaps to fill when using digital and data-driven technologies. Data protection, privacy concerns, reliable broadband access are areas that require attention, CPA Canada says.
Moving forward, as is addressed in Canada’s Digital Charter, government must build on its efforts to modernize legislation and regulatory frameworks and ensure sound data governance, it advises.
“The way we collect, protect, share and report on data needs to be subject to appropriate governance in all areas of our economy,” says Beal. “Canada must also accelerate its efforts to close its gaps in broadband coverage.”
4) TREAD CAREFULLY WITH TAX
CPA Canada and the members who responded to a poll agree that government should modernize the tax system to support economic recovery over the long term.
“A comprehensive tax review should be a priority on the government’s agenda in the medium term,” says Bruce Ball, CPA Canada’s vice-president, taxation. “A simpler, fairer, more efficient and competitive tax system is key to a sustainable economic recovery for Canada.”
There are a few areas that should be prioritized to support economic recovery.
- Simplify taxes with a review of tax expenditures and further streamline tax credits and deductions, while removing inefficient tax preferences and increasing tax system automation.
- Avoid personal or corporate tax increases and look for alternative ways to generate more tax revenue instead.
- Ensure any tax changes support the economy, operate efficiently and minimize disruption to taxpayers and businesses.
5) ACT FISCALLY RESPONSIBLE
Finally, with a combined federal-provincial gross debt load of approximately $2.5 trillion, a projected $343.2 billion federal deficit and tens of billions more in provincial deficits to add to it, Canada’s finances must be managed in a transparent, accountable, disciplined and sustainable manner, CPA Canada says.
As part of the government’s next economic and fiscal update—planned in the fall following the fiscal “snapshot” provided in July—CPA Canada urges the government to think medium- to long-term and adopt a fiscal anchor or rule along with detailed economic and fiscal projections to help limit debt financing and instill business confidence and investment.
REVIVING THE ECONOMY
For a snapshot into how CPA Canada and economists perceive Canada’s economic recovery out of COVID-19, tune into the webinar, Rebuilding the economy: What does Canada need for a better future?, and read the Rebuilding the economy: What we heard report, which includes views from fellow CPAs.