TORONTO (Reuters) – Canada on Tuesday sought to close competitive gaps with United States with a budget aimed at attracting investment in the low-carbon economy, including tax incentives for electric-vehicle (EV) manufacturers and expanding the electricity grid.
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COMMENTARY
TED MALLETT, DIRECTOR OF ECONOMIC FORECASTING AT THE CONFERENCE BOARD OF CANADA
“The overall take is that they are being conservative on the outlook side. They are obviously worried about the recessionary conditions that are in store for the rest of the year. So the revenue forecast is quite modest and they’ve boosted up their green energy transition spending.”
“So the deficit plans have been pushed higher and the back balance will be pushed out later beyond the forecast horizon. That’s not what we are hoping for but everything depends on how the economy responds to world conditions, or how the green conditions happens and those are still big unknowns.”
“I think there is a risk to not doing it (energy transition spending). If other countries are able to green their infrastructure much faster maybe they will attract more investment in terms of the production and so on of these new technologies which means that Canada may not have the kind of economic benefits from that aspect of the economy.”
JULES BOUDREAU, SENIOR ECONOMIST, MACKENZIE INVESTMENTS
“The surprise was more on the revenue side more than the spending side. I think this time, it probably puts a little bit of impetus on the Bank of Canada to think about not cutting rates if they were thinking about cutting rates towards the end of 2023. The new C$400 cheque due to the GST rebate is probably going to push growth a little bit incrementally higher in 2023. So, that could be the difference between the Bank of Canada standing pad or cutting rates.”
“The government seems to be tilting slightly it’s new bond issuance towards the short end. So that could put a little less pressure on long-end rates, although we’re not seeing that for the moment.”
“I would expect it to be pro-Canadian dollar over the medium term because of the net stimulus that is more than we expected from the budget.”
SARAH PETREVAN, DIRECTOR OF SUSTAINABILITY, CEMENT ASSOCIATION OF CANADA
“From our industry’s perspective we are very pleased. Prior to this budget we were not eligible for the carbon capture utilization and storage (CCUS) investment tax credit, but they have now broadened the eligibility parameters.”
“Carbon contracts for differences help mitigate some of the risk while the market for purchasing net zero products matures. This really gets Canada over the hump and enables us to build net zero technology today or in the very near future, which is what we need to do if we want to be competitive with the U.S. and IRA.
“This budget far exceeded my expectations of how targeted the government was going to be.”
FRANCIS FONG, SENIOR ECONOMIST IN CHARGE OF ESG RESEARCH AT TD ECONOMICS
“The government has eschewed fiscal restraint and just continues to drive a big spending number on the top line.”
“The big open question, heading into this budget was how was Canada going to react to the Inflation Reduction Act … It’s clear that they are considering it a competitive threat but on the same token Canada, stands to benefit from the IRA as much as is possible for a major trading partner, given concessions in domestic content requirements to include Canada and Mexico to be North American content as opposed to Made in America.”
“So in this kind of convoluted way, the IRA represents both an opportunity and a challenge. And I think if you kind of take a look at budget 2023, the maturation of climate policy in this country is clearly reacting to where government sees those opportunities that ought to be supported, and also where those challenges exist where more help may be needed.”
MARK ZACHARIAS, EXECUTIVE DIRECTOR OF CLEAN ENERGY CANADA
“We thought today’s budget was generally excellent and it sets Canada on a path for prosperity. We really like the focus on electrification, the investment is needed and timely and on the scale required.”
“The investment tax credits for clean tech manufacturing positions Canada as a leader, particularly in zero-emissions vehicles.”
“Our suggestion for future budgets is we’d like to see production tax credits for electricity, batteries and clean hydrogen. That would help Canada match the Inflation Reduction Act.”
ROBERT ASSELIN, BUSINESS COUNCIL OF CANADA
“On the IRA responses, I thought some of the responses (were) good. The tax credits are focused on the things we need to get right including electricity, carbon capture utilization and storage (CCUS), clean technologies. But execution and implementation are super important.”
“A budget doesn’t solve everything. There was so much they could do, they chose to focus mainly on tax credits for their response to the IRA. I think those are, for the most part, well targeted.”
“No big surprises other than a much more risky fiscal framework going forward than a lot of people had hoped for.”
JAGMEET SINGH, LEADER OF NEW DEMOCRATIC PARTY
“his is a difficult time for Canadians. The cost of everything is up. That’s why we fought for a budget that saves you money and creates good jobs with better wages. Justin Trudeau voted against dental care twice and he didn’t want to double the GST rebate, but we didn’t take no for an answer. We fought and we got those things for working people.”
PIERRE GRATTON, CEO MINING ASSOCIATION OF CANADA
“We have been saying for years that Canada’s relative tax provision for mining within the OECD is high, and with IRA we were seeing more investments going into U.S. for critical minerals. We needed to level that playing field, now these measures of 30% investment tax credit for any mining extraction or towards buying equipments do level the playing field in favour of mining critical minerals in Canada.”
RANDALL BARTLETT, SENIOR DIRECTOR OF CANADIAN ECONOMICS AT DESJARDINS GROUP
“It would be challenge to characterize this budget as being prudent. There is significant new spending, with larger deficits and a rising debt-to-GDP ratio into next year.”
KEITH CURRIE, FARMER AND PRESIDENT OF THE CANADIAN FEDERATION OF AGRICULTURE
“There’s not a lot of new (farm) initiatives. It’s more about starting to follow through. We were hoping for some kind of announcement on the fertilizer tariff (absorbed by eastern farmers for Russian imported fertilizer). It really isn’t going to help the farmers in Eastern Canada directly who paid the tariff. We would like to see some kind of incentive to get some fertilizer production here in Eastern Canada, because we don’t have any.”
(Reporting by Rod Nickel, Steve Scherer, Divya Rajagopal, Molly Cone, Nia Williams, Fergal Smith; Editing by Denny Thomas)
