Chronology of economic events.
Severe ice storms paralysed Eastern Ontario and Western Quebec early in the month, knocking out power in most regions and creating a state of emergency. Canadian troops were deployed to assist hydro workers and the federal and provincial governments announced substantial aid packages. More than two million people were without power for varying amounts of time and business was shut down in Ottawa and Montreal for several days.
The Royal Bank of Canada and the Bank of Montreal announced a C$ 40 billion merger plan. Combined, the two banks have 17 million customers, C$ 435 billion in assets and a stock market value of over C$ 40 billion.
The Canadian dollar slid to 68.70 US cents at month-end, the lowest value in its 140-year history, while the Bank Rate was hiked half a point to 5 per cent.
The federal government released its 1998-99 fiscal year budget on 24 February announcing that the budget will be balanced in 1997-98 and also in 1998-99 and 1999-2000. Highlights include a C$ 2.5 billion multi-year Canada Millennium Scholarship Foundation which is to provide 100 000 scholarships a year to low and middle-income students; as of 1 July income that can be earned tax-free rises C$ 500 for individuals and CS 1 000 for families; the 3 per cent general surtax will be removed on taxable incomes up to C$ 50 000; increased limits on child-care expense deductions; government grants of up to C$ 400 a year to parents who set up registered education savings plans (RESPs) for their children, employers will not have to pay unemployment insurance premiums for young Canadians hired in 1999 and 2000. Overall, the budget has C$ 10.9 billion in new programme spending over four years and C$ 7.0 billion in tax cuts.
Alberta tabled its budget mid-month with a slight surplus forecast. Highlights include a 1.5 per cent cut in the personal income tax rate retroactive to 1 January; C$ 24 million in bonuses to civil servants worth about 2 per cent of salary; a planned 5.5 per cent increase in doctors' fees over the next three years while doctors received an 8 per cent salary increase over three years. Both the civil servants and doctors had accepted salary cuts four years ago.
Ontario Hydro reported a C$ 6.3 billion loss last year, the biggest annual loss in Canadian corporate history. The loss included a one-time charge of C$ 6.6 billion largely related to a restructuring programme for Hydro's nuclear operations.
The official 1 to 3 per cent inflation target is extended until the end of 2001.
British Columbia forecast a deficit of C$ 95 million, with C$ 1.25 billion for new schools, hospitals, roads and other infrastructure, an increase of C$ 275 million; increased spending on health care, education and child protection; a persona! income tax cut of 1 percentage point to 49.5 per cent of the federal rate, effective next 1 January; a cut in the corporate capital tax by raising the asset level at which it kicks in from C$ 1.5 million to C$ 5 million by 1 January 2001; and a cut in the small business corporate income tax rate to 8 per cent from 9 per cent over two years.
Quebec projected a deficit of C$ 1.1 billion before the accounting reform. Highlights include no tax increases and no substantial new programme spending; cuts in payroll taxes for small and mid-sized businesses over two years; and revenue and expenditure measures totalling C$ 232 million over two years in lob creation for youths, internship and day care.
Saskatchewan tabled its fifth consecutive balanced budget. Highlights Include a 2 percentage point cut to personal Income taxes to 48 per cent of the federal rate, effective 1 July, over C$ 200 million in new funding for child welfare, health care, education, highways and policing; and debt reduction of almost C$ 500 million due to a surplus in general revenue and money from the Crown Investments Corp.
Newfoundland forecast a C$ 10 million deficit, with new spending for health care and education, and a 7 per cent increase in monthly social assistance payments over three years. Prince Edward Island projected a shortfall of CS 3.4 million, with no tax changes and almost no changes in spending plans.
Manitoba's budget projected a fourth consecutive surplus in 1998-99. The personal income tax rate was reduced from 52 per cent of Basic Federal Tax to 51 per cent for the 1998 taxation year and to 50 per cent for 1999. There were new spending Indicators on health, education, children and support to families, as well as a doubling of the payment towards debt to C$ 150 million.
The Canadian Imperial Bank of Commerce and Toronto-Dominion Bank, Canada's first and fifth-largest banks by assets, respectively, announced plans to merge in a C$ 47 billion deal. The proposed union follows less than three months after the proposed merger of the Royal Bank of Canada and the Bank of Montreal.
The Ontario government tabled its 1998-99 budget on 5 May with 36 targeted tax cuts and a forecast C$ 4.2 billion deficit. These include a reduction in the Ontario corporate income tax rate for small business, while the final instalment of the 30 per cent personal income tax cut will go into effect 1 July, six months ahead of schedule. Other highlights include increased spending for health, youth, employment, education and child care.
Nova Scotia's budget was tabled, projecting the third consecutive balanced budget and including new initiatives in health care, education and child support.
The Bank of Canada raised its Bank rate from 5 to 6 per cent at month-end, the first increase since January. as the Canadian dollar fell to an all-time intra-day low of 63.11 US cents.
The Bank of Canada lowered its Bank Rate by 1/4 percentage point at month end, matching a reduction in US rates. The chartered banks responded by lowering their prime rates to 7 1/4 from 7 1/2 per cent.
Following an interest rate reduction in the United States, the Bank of Canada cut its key rate by a quarter of a percentage point to 5 1/2 per cent in mid-October, leading commercial banks to lower their prime rates to 7 per cent.
The Bank of Canada cut its Bank Rate by 25 basis points to 5 1/4 per cent, following Interest rate reductions by the US authorities. Commercial banks immediately lowered their prime rates to 6 1/4 per cent.
New Brunswick tabled its fifth consecutive balanced budget. Its C$ 4.6 billion expenditure plan includes a C$ 74 million increase in health spending and a third consecutive cut in personal income tax rates, to 60 per cent of the federal income tax.
The federal government turned down two major bank merger proposals because they would have led to an unacceptable concentration of economic power, a significant reduction in competition, and would have reduced the government's policy flexibility to address potential future prudential concerns. Furthermore, the government announced that it would not consider any merger among major banks until a new policy framework is in place. As a result, the Royal Bank of Canada and the Bank of Montreal terminated their agreement to merge, as did the Canadian Imperial Bank of Commerce and the Toronto Dominion Bank.
The federal government released its budget on 16 February, announcing that a balanced budget or better is expected for 1998/99 and that it is committed to a balanced budget or better for 1999/2000 and 2000/01. Highlights included increased provincial transfers for health care by C$ 11.5 billion over five years as well as money for health research and information; the elimination of employment insurance premiums for employers on new jobs created for youth aged 18-24; a CS 300 million increase to the Canada Child Tax Benefit programme; and across-the-board tax cuts of C$ 16.5 billion (as a result of both the 1998 and 1999 budgets) over the next three years, including the elimination of the 3 per cent taxpayer surtax on high-income earners effective 1 July (after it was eliminated for low-income workers last year).
Alberta released its budget plan with increased spending of C$ 1.7 billion over the next three years, mainly for health and education. As well. Alberta will move to a single provincial tax rate of 11 per cent of income in 2002, surtaxes will be phased out and the basic personal and spousal exemptions will be increased and indexed to inflation.
The Newfoundland government announced its budget with a forecast deficit of C$ 33 million in 1999/2000, after a small surplus for the 1998/99 fiscal year. Highlights included increased spending for health and for education, no tax increases, and a 25-cent rise in the provincial minimum wage.
Saskatchewan released its budget with a slight surplus forecast for 1999/2000. Highlights included increased spending for health care and a cut in the provincial sales tax rate from 7 to 6 per cent.
Quebec forecast a second consecutive balanced budget for this fiscal year. Highlights of the 1999-budget included personal income tax reductions of C$ 400 million annually by July 2000) and additional health and education funding.
The British Columbia budget forecast a deficit of C$ 890 million in 1999/2000. Revenue measures included a personal income surtax reduction and a small business corporate income tax rate reduction. Expenditure initiatives focused on health and education.
The Bank of Canada cut its Bank Rate by 25 basis points to 5 per cent at the end of March.
The Prince Edward Island budget forecast a small surplus of C$ 4 million in 1999/2000. The personal income tax rate was reduced by I percentage point to 58.5 per cent, effective 1 January 1999. Expenditure initiatives mainly focused on health and economic development.
The Manitoba budget forecast a C$ 21 million surplus for 1999/2000. The personal income tax rate will be reduced in two steps: from 50 to 48.5 per cent for the 1999 taxation year and to 47 per cent as of 1 January 2000. Spending initiatives focused on health, education and children and families.
The Ontario budget targeted a deficit of C$ 2.1 billion for 1999/2000. Both personal income taxes and residential property taxes will be reduced by 20 per cent over the next five years. The personal income lax rate will be reduced from 40.5 to 38.5 per cent as of I July 1999. Expenditure measures focused on health (C$ 1.6 billion), education and infrastructure.
The Bank of Canada cut its Bank Rate by 25 basis points to 4 1/4 per cent at the beginning of the month.
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|Publication:||OECD Economic Surveys - Canada|
|Article Type:||Statistical Data Included|
|Date:||Aug 1, 1999|
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