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Morning Business Briefing

Ottawa, provinces may slash deficits faster than we think Add to ...

These are stories Report on Business is following Thursday, June 6, 2013.

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Fiscal standings on better track
Canadian governments could get their financial houses back in order sooner than we think, which could be a plus for them come election time, one of the big banks believes.

That could mean they balance their budgets at a faster pace, or “ease up” on restraint measures, Canadian Imperial Bank of Commerce said today.

“Canadian governments are selling themselves short,” said economists Warren Lovely and Emanuella Enenajor.

“With ample insulation against today’s still-tepid economic climate and prospects of a more forceful 2014-15 global expansion, federal and provincial governments will enjoy some important fiscal breathing room,” they said in a new report.

“In response, deficit elimination timelines could be accelerated, recovering ground given up in the past year. Alternatively, some governments will be in a position to ease up on spending restraint without jeopardizing budget targets, hinting at a less onerous medium-term fiscal drag. Incremental wiggle room also creates scope for new fiscal initiatives that could hold the key to re-election for some.”

They don’t see much change in the 2013-14 fiscal year, but the two years after that are another matter.

Indeed, Mr. Lovely and Ms. Enenajor believe a pick-up in economic growth will shave $30-billion off the deficits of the federal and provincial governments in that two-year period.

“That already sounds impressive enough,” they said.

“But if anything, Canada’s finance ministers could end up being even more pleasantly surprised. Powered by external markets, we see Canadian nominal GDP growth topping 5 per cent in both 2014 and 2015, comfortably north of the weighted average growth forecast built into current fiscal plans.”

While Canada boasts a triple-A rating, better-than-forecast timelines would “defuse a lingering threat” to the ratings of some provinces, they added.

Poloz in first public appearance
The new governor of the Bank of Canada sees the global recovery as “more like a postwar reconstruction” that will take time and patience.

Stephen Poloz appeared today before the Commons finance committee and, in his opening statement, at least, gave no hints and didn’t stray from the central bank’s playbook.

The global economy is still struggling, Mr. Poloz told the committee, and it will take time for a sustained rebound, The Globe and Mail's Kevin Carmichael reports.

“Global economic activity is expected to grow modestly this year before strengthening over the following two years,” he said.

“But this is not a recovery in the usual sense. It’s more like a postwar reconstruction. It will require sustained and focused efforts to rebuild global economic potential.”

While Canada came through the meltdown better than most, it was still an unusual recession, with an unusual recovery. But Mr. Poloz does see better times ahead.

“The sequence we can anticipate is the following: foreign demand will recover; our exports will strengthen further; confidence will improve; companies will invest to increase capacity; existing companies will expand and new ones will be created.”

His comments came as both the European Central Bank and the Bank of England held their benchmark rates steady at 0.5 per cent.

Public Mobile sold
The ground continues to shift under Canada’s wireless industry.

Public Mobile, one of the upstarts formed in 2008, said today it’s being taken over by two investment firms, Thomvest Seed Capital Inc. of Toronto and Cartesian Capital of New York.

This is the latest in a series of developments in the wireless world, following the Canadian government’s decision to nix a deal between Telus Corp. and troubled Mobilicity, another of the new entrants, and a new code of conduct for wireless carriers unveiled by the telecom regulator.

“Despite the current uncertainty in the Canadian wireless industry, Public Mobile’s strong performance and rapid growth continue to attract financial backing from blue chip investors,” said chief executive officer Alek Krstajic.

“This financing is an enormous vote of confidence in Public Mobile’s business and a significant milestone in our company’s history. The support of Thomvest and Cartesian enables Public Mobile to continue the rapid expansion of our subscriber base from a strong and well-funded position.”

Thomvest will be the controlling shareholder in the company, the three said in a statement that projects further turmoil in the sector.

“In the coming months, the Canadian wireless industry will see consolidation, and an important spectrum auction,” said Cartesian partner Paul Pizzani.

Game of thrones
No, they’re not like the rest of us, but kings and queens are grappling with austerity, too.

In Britain, the royal family has faced cutbacks and the way in which it is paid in the post-crisis era, and is under scrutiny for expenses.

In Spain, according to The Telegraph, King Juan Carlos decided recently to forego the €21-million ($28.4-million Canadian) royal yacht. (I know, right? Unemployment in Spain is at 27 per cent.)

And now, the royals of Belgium are going to have to pay taxes for the first time, Reuters reports.

This follows a controversy surrounding Queen Fabiola and her reported plans to skirt taxes via an estate transfer.

According to the report, the queen’s funding will also be slashes to €450,000, or some $590,000 U.S. from €1.3-million. (I know, right?)

Back to the Commonwealth, here’s what the Monarchy says on its official website: “The Monarchy has sometimes been described as an expensive institution, with Royal finances shrouded in confusion and secrecy. In reality, the Royal Household is committed to ensuring that public money is spent as wisely and efficiently as possible, and to making royal finances and transparent and comprehensive as possible.”

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  • Updated August 18 3:15 PM JST. Delayed by at least 15 minutes.

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