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

OTTAWA (Reuters) – Canada’s Liberal government, insisting on Wednesday that “this is not the time for austerity,” promised major new investments and policy initiatives to help the country recover from the coronavirus pandemic.

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

The government made the commitments in the so-called Speech from the Throne, in which it outlined its plans and made clear the main priority was protecting Canadians from COVID-19.

One major element “is supporting people and businesses through this crisis as long as it lasts, whatever it takes,” the government said, adding it would maintain a commitment to fiscal sustainability and economic growth.

“This is not the time for austerity,” said the speech delivered on Trudeau’s behalf by Governor General Julie Payette – the representative of Britain’s Queen Elizabeth, Canada’s head of state. “Canada entered this crisis in the best fiscal position of its peers.”

The range of promises and mentions of significant investments could upset markets showing signs of nervousness about a sharp rise in 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 details of the speech were published, touching 1.3378 to the U.S. dollar, or 74.70 U.S. cents.

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The 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.

The speech is a confidence-building measure 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 have made clear they are likely to vote in favor, which would ensure Trudeau’s survival. Party leader Jagmeet Singh is due to react at 4:30 p.m. (1930 GMT).

The prime minister’s popularity initially soared over his handling of the pandemic, but opinion polls suggest he and the Liberals were damaged by an ethics scandal over his close ties to a charity chosen to run a student grant program.

Later on Wednesday, Trudeau plans to address the nation on the urgency of fighting COVID-19.

Canada is at a “crossroads” in the fight against a second surge of the infection, health officials said on Tuesday, when cases rose by 1,248 from the previous day.

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