We need short-term measures to cool Canada's housing market: RBC CEO
Royal Bank of Canada Chief Executive Officer Dave McKay is urging the federal government to apply a deft touch when it comes to further stimulus spending.
In a television interview Thursday, McKay said additional stimulus spending may not be necessary if Canadians unleash a torrent of pent-up savings once the pandemic is under control and restrictions are lifted.
“This is a read-and-react situation … we should be watching how we recover, we should be layering in stimulus as needed. Keep your powder dry, target it to sectors,” he said. “Putting it all in the market at once, in one large program, I think could overstimulate the economy. It’s just not an effective, prudent use of all our stimulus at once.”
In the fall fiscal update, the federal government pledged to spend between $70 billion to $100 billion over the next three years to guide the domestic economy back to full capacity. However, Ottawa has not detailed exactly where that money will be spent, nor broken down how much stimulus it intends to inject into the economy each year.
Finance Minister Chrystia Freeland has taken note of the estimated $100 billion in additional savings Canadian households are sitting on, describing it as “pre-loaded” stimulus that could prove a boon to economic growth as Canadians make purchases otherwise put on hold during the pandemic.
Further stimulus measures could further strain the already historic debt levels Canada is carrying due to the pandemic, as the federal government forecasts a $381.6-billion deficit in Fiscal 2020-21 with no path back to balance over the forecast horizon.
McKay is far from alone from thinking that an additional round of stimulus is necessary, with a range of economists declaring an effective vaccine rollout and subsequent reopenings would be more of a balm for what ails the Canadian economy.