Good morning. When the dust settled on a tornadic day in Ottawa, the federal government had a new Finance Minister and a fresh economic statement promising relief for cash-strapped Canadians. Today, we look at the man the Prime Minister tapped to take on the country’s most important economic portfolio – and the promises he’s suddenly on the hook to deliver.
In the news
Canada’s inflation rate dipped below the Bank of Canada’s 2-per-cent target for the second time in three months, the latest sign that the central bank has tamed inflationary pressures in the economy. Markets are now split over whether Governor Tiff Macklem will cut the bank’s benchmark rate further or hit pause at its next rate announcement on Jan. 29.
Financial crime is in Ottawa’s crosshairs as it plans to increase the amount companies such as banks can be fined for failures in anti-money-laundering controls by as much as a factor of 40.
Dye & Durham Ltd.’s entire board resigned and appointed the nominees of Engine Capital LP just hours before an annual meeting that was expected to sweep the dissident investor’s slate into power, ending a year-long battle for the future of the Toronto legal software company.
Happening today:
- The U.S. Federal Reserve is expected to cut its benchmark lending rate by a quarter of a percentage point. Markets are anticipating the Fed will scale back its easing in 2025 in anticipation of higher inflation under the Trump administration.
- Earnings include Birkenstock Holding Ltd. The German company, which says its footwear is ”more than a shoe. It’s a way of thinking, a way of living,” is among the only bright spots in the country’s economy. (And I’m long on Birkenstocks.) Microchip maker Micron Technology also reports after the close. I’ll be looking for updates on its planned US$100-billion semiconductor fabrication facility in Upstate New York.
Dominic LeBlanc speaks to reporters yesterday in Ottawa after being sworn in as Finance Minister.Patrick Doyle/Reuters
In focus
Tracking the fallout: A new Finance Minister and new pocketbook pledges
Chrystia Freeland’s resignation has prompted speculation that a federal election may be called in the earlier months of 2025, meaning both the new Finance Minister and the measures laid out in this week’s economic statement could be thrown into doubt. But it’s worth pausing, for a moment, on what Ottawa’s economic approach means for Canadians as the government prepares for the return of Donald Trump to the White House.
» The person
We should first note that Dominic LeBlanc doesn’t appear to have been Justin Trudeau’s first choice. Even on Friday, our politics team reports, the Prime Minister told Freeland that she was going to be replaced by former central banker Mark Carney.
Whatever is going on between Trudeau and Carney, LeBlanc is now carrying the financial football. In the business community, he’s being described as loyal, friendly, among the government’s best communicators, possessing the “sophistication of a Harvard LLM and the rustic charm of a simple Acadian,” but lacking in one crucial aspect: financial acumen.
“The fact that we have another person who doesn’t have a lot of finance experience is not the greatest thing,” Greg Taylor, chief investment officer at Purpose Investments, told The Globe’s Andrew Willis.
“There is definitely, within the finance community, a desire to see more fiscal discipline out of Ottawa than this person can bring.”
RioCan REIT founder Edward Sonshine posited that LeBlanc is a “placeholder” ahead of the next federal election. And as trade negotiations intensify with Trump, LeBlanc’s appointment seems to have struck Sonshine as uninspiring. “They’re going to make chopped liver out of us.”
» The pocketbook
As personal economics reporter Erica Alini writes, there are key measures from the economic update affecting Canadians’ finances. Below, a quick look at some of her takeaways:
What happened to the $250 cheques?
The federal government’s announcement last month about a two-month tax holiday came with a pledge to send most working Canadians $250 cheques in April. But the economic statement contains no trace of the second measure, which has so far failed to garner the support of the NDP.
Removing the mortgage stress test for more borrowers
Ottawa is eliminating the mortgage stress test for borrowers with at least 20 per cent of the equity in their homes who switch to what’s known as an insurable mortgage at renewal.
Insurable mortgages are loans of as much as 80 per cent of the value of a home on which lenders purchase a type of default insurance known as bulk or portfolio insurance. The option is available for purchase prices of less than $1-million and amortizations of up to 25 years.
Automatic tax-filing
The government said it’s working on legislation to allow automatic tax-filing, beginning with lower-income Canadians, as soon as the 2025 tax year.
The Canada Revenue Agency would send eligible Canadians a pre-filled return based on information it already has, then give the recipients an opportunity to modify the documents or opt out of automatic filing. Those who do not opt out would have their returns filed on their behalf by the tax agency.
Stricter rules on payday loans
After introducing new interest rate limits that will take effect at the start of 2025, Ottawa wants to further tighten rules for payday loans, requiring the industry to accept payments in instalments and offer a minimum repayment term of 42 days.
Let’s go sliding
» The loonie continued its descent yesterday to the weakest level against the greenback since the pandemic shut everything down in 2020. The decline sharpened in the wake of Trump’s tariff threats and as the Canadian economy continued to show signs of indigestion. The loonie doesn’t typically follow the drama on Parliament Hill, but Scotiabank chief FX strategist Shaun Osborne said this week’s tumult risks accelerating its fall. “Canadian politics rarely, if ever (in my recent memory), spill over into the FX markets in a significant way,” Osborne wrote in a note to clients. “But developments in Ottawa are clearly adding to deadweight on the CAD right now.”
You can read more here.
The outlook
Also on our reading list
In the air: Ottawa is pressing ahead with its contentious new rules to limit greenhouse gas emissions from provincial electricity grids, although they have been softened from its original proposal.
In the air 2: Air Canada has set ambitious targets as it forecasts strong demand for leisure travel across domestic and international routes. Did Canada sell its shares too soon?
In the air 3: Intelligence officials warned police this summer that cities aren’t ready for hostile drones.
Morning update
Global markets edged higher with investors expecting a 25-basis-point interest-rate cut by the U.S. Federal Reserve this afternoon and looked to guidance on monetary policy in the new year. Wall Street futures and TSX futures were in positive territory in anticipation of a rate cut.
Overseas, the pan-European STOXX 600 was up 0.19 per cent in morning trading. Britain’s FTSE 100 rose 0.17 per cent, Germany’s DAX gained 0.28 per cent and France’s CAC 40 added 0.24 per cent.
In Asia, Japan’s Nikkei closed 0.72 per cent lower, while Hong Kong’s Hang Seng added 0.83 per cent.
The Canadian dollar traded at 69.83 U.S. cents.
