Canada’s Construction Industry Benefits Even When People Bank Stimulus

The Canadian government has infused massive amounts of cash into the economy via stimulus checks to its citizens, but polls show that many people only plan to spend 40% of it while banking the rest or paying off debt. Still, economists say that when someone has more in savings and less in debt, they are more likely to spend consistently. And with so much emphasis on housing, home improvements and additions right now, the construction industry could benefit from this behavior.

Any time the government increases spending, decreases taxes, or combines the two, it encourages economic activity through direct purchases of goods and services and savings, both of which make for a more robust economy. It gives people more disposable income. This is considered beneficial when a country is in recession, which Canada is experiencing now.

The COVID-19 pandemic has caused severe recession across the globe and in response, governments have stepped up to help their citizens and businesses. Canada set up emergency wage subsidies, extended a work-sharing program, and set up a program for interest-free business loans, among other stimuli. For individuals, Canada set up a mortgage payment deferral program, increased unemployment benefits and extended sickness benefits. It also sent out $2,000 checks to individuals.

These moves are all meant to hasten Canada's economic recovery and they will if interest rates remain low and investment high. Exchange rates, the trade balance, and the rate of inflation all must be considered as well. Increasing interest rates raises the costs of doing business and the costs to individuals seeking to borrow funds or make purchases.

But with Canada's construction industry accounting for 1.4 million highly skilled and trained workers generating 7.4% of the country's gross domestic product, the Canadian Construction Association is asking the government to increase spending on infrastructure at a time when investments have decreased along with confidence.

According to its letter to the Cabinet, “In the face of the COVID-19 pandemic, building strong community infrastructure is more important than ever, and we commend the government for working to address the infrastructure gap and funding the Investing in Canada Plan. However, there continue to be delays and barriers to project approvals. Of some 65,000 projects approved since 2016, only 47,000 have actually started.”

The association urges the government to:

  • Remove barriers between the federal government and certain provinces to keep infrastructure funding flowing;
  • Smooth the approval process and administration, so projects get approved quicker;
  • Consider increasing investments in infrastructure until the economy begins to recover.

If this effort is successful and individuals continue looking for new homes or renovating their existing homes, the construction industry could get a boost.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.

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