Rosenberg calls for breather amid 'overwhelming' amounts of stimulus
As the federal government rolled out billions of dollars in COVID-19 relief programs, Ottawa may want to take a breather before providing any further aid, according to influential economist David Rosenberg.
“There’s no reason for the [government] to do more right now," said Rosenberg, chief economist and strategist at Rosenberg Research & Associates, in an interview with BNN Bloomberg on Wednesday.
"I know we talk a lot about monetary policy but the fiscal stimulus in Canada as a share of [gross domestic product] has been about double what it’s been in the rest of the world."
Massive fiscal stimulus, including $212 billion in direct support measures, has helped the Canadian economy rebound, as the Bank of Canada expected in its July forecasts.
That additional funding has put Canada on track for a record $343.2 billion deficit this fiscal year.
That should take some pressure off the central bank, which kept its lending rate unchanged at 0.25 per cent Wednesday and reiterated its stance to keep rates at record lows until the Canadian economy is on more solid footing.
The BOC dropped language about further rate cuts in its policy statement, while noting its asset purchase program would be “calibrated” to provide the monetary policy stimulus as needed.
“That’s one of the key reasons the Bank (of Canada) doesn’t have to do anything right now. The fiscal stimulus has been overwhelming,” Rosenberg said.
“If anything, the Liberals are ‘damn the torpedoes’ full steam ahead on fiscal policy so I don’t see the Liberals in Ottawa stepping off the gas at all,” he added.
Rosenberg pointed out that total personal income jumped 26 per cent, due in large part to government income support programs, despite the Canadian economy suffering the worst recession since the 1930’s in the first half of the year.
While he believes most of that money will go into savings accounts and towards debt, he said even if a “tiny part” flows into the real economy, it could stimulate retail sales.
“Frankly, I don’t think we really need more fiscal stimulus right now in Canada. They’ve done so much already,” he said.