CRIMINAL CAPITALI$M BY ANY OTHER NAME

Deloitte pays $1.59 million to CPA Ontario for breaching code of conduct

The Canadian Press

CPA Ontario says Toronto-based Deloitte LLP has paid $1.59 million in fines and costs for breaching the regulatory body’s code of professional conduct. 

In a press release Tuesday, CPA Ontario says a number of Deloitte auditors backdated audit working paper signoffs between November 2016 and May 2018.

They did so by changing the date and time settings on their computer clocks to manually override controls in Deloitte’s audit software.

The organization says that during the year-and-a-half-long period, more than 930 audit working papers were backdated in at least 39 audit engagements. 

CPA Ontario says Deloitte admitted to failing to have the necessary policies and procedures in place to ensure standards of practice were being followed. 

It says it has taken into account remediation efforts by Deloitte, including improvements to quality control, internal discipline and mandatory training. 

This report by The Canadian Press was first published Oct. 31, 2023.

CARNEY VS POILIEVRE VS TRUDEAU

Ex-BOC governor Carney questions carbon price break on home heating oil

The Canadian Press

Mark Carney pressed for Canada to stick with predictable climate policy as he questioned the federal government's move to lift the carbon price on home heating oil. 

The former central banker, who has long been rumoured to be a possible future Liberal leadership candidate, says he would have looked for different ways to provide financial support to Canadians other than the government's chosen path. 

But Carney, the United Nations special envoy on climate action and finance who was speaking at a net-zero conference in Ottawa, also says no other government and prime minister in Canadian history has done more on climate and he applauds parallel moves to help households transition to greener heating alternatives.

Prime Minister Justin Trudeau's announcement last week to increase the carbon price rebate for rural Canadians and lift the price on home heating oil for the next three years marks the first time the Liberals have retreated in any way on their carbon pricing policy. 

Affordability concerns have hit the party's polling numbers in four Atlantic provinces, where about one-third of homes still use heating oil, a far higher proportion than the rest of Canada, but Trudeau has denied the pricing change was about saving Liberal seats. 

The government also announced it was expanding incentives for home heat pumps, which is set to begin as a pilot project in Atlantic provinces.

This report by The Canadian Press was first published Oct. 31, 2023. 

Poilievre calls on Liberals to exempt all forms of home heating from carbon price

Nojoud Al Mallees, The Canadian Press

Clifford Small, Conservative MP for the Coast of Bays-Central-Notre Dame looks on Conservative Leader Pierre Poilievre holds a press conference regarding his “Axe the Tax” message from the roof a parking garage in St. John’s on Friday, October 27, 2023. THE CANADIAN PRESS/Paul Daly

Conservative Leader Pierre Poilievre is calling on the Liberals to exempt all forms of home heating from the carbon price, after Prime Minister Justin Trudeau announced a temporary exemption that only applies to home heating oil.

The federal government announced last week that it is increasing the carbon price rebate for rural Canadians and lifting the carbon price off home heating oil entirely for the next three years.

Poilievre wrote a letter to Trudeau on Sunday urging the government to expand the exemption to all forms of home heating, including natural gas, which is more common in Western Canada.

"In pausing the tax on home heating oil until after the election, however, you plan to keep the tax on lower-emitting natural gas heat for which bills will be jumping even further in mere weeks as it gets colder," wrote Poilievre. 

"That is why common sense Conservatives are offering our full co-operation to pass an emergency bill tomorrow to axe the carbon tax on all forms of heat before winter heat bills hit Canadians next month."

The carbon price is intended to make fossil fuels more expensive as an energy source, to encourage people to find cleaner alternatives. 

But Trudeau said last week it had become clear that wasn’t happening when it came to heat pumps, in part because it takes time and money to make the switch, so giving people more time to make the switch before paying the carbon price was a good choice.

The changes to the carbon pricing regime come as affordability concerns leave the Liberal party flailing in the polls in Atlantic Canada, and one of Trudeau's Atlantic cabinet ministers suggested politics were at play in the decision. 

In an interview with CTV News on the weekend, Rural Economic Development Minister Gudie Hutchings said the Liberals' Atlantic caucus pushed for the changes to home heating oil. Most Atlantic Liberals MPs stood behind Trudeau as he made the announcement on Oct. 26.

Hutchings suggested that perhaps Prairie provinces should elect more Liberals to push for exemptions that affect constituents in those provinces, prompting backlash.

"Atlantic caucus was vocal with what they've heard from their constituents, and perhaps they need to elect more Liberals in the Prairies so that we can have that conversation as well," Hutchings said.

The Conservatives jumped all over that comment on Monday, calling it proof that the carbon tax was never an environmental plan, but a tax plan.

"And the announcement this week was about the Liberals' plummeting poll numbers, not about doing what is right for Canadians," a statement from the party said.

"Minister Hutchings just said as much when she told Canadians west of Ottawa that they’d need to elect more Liberals to get a reprieve from their punitive taxes."

Liberal House leader Karina Gould said the Conservatives know that the carbon price comes with a rebate program to offset the increased cost, while still providing an incentive to cut fossil-fuel use. That's because the rebates remain intact even if you cut down on your fossil-fuel use and therefore pay less carbon price.

"The leader of the Opposition knows that Canadians who live in jurisdictions where the price on pollution applies get over $1,000 a year from the government of Canada to fight climate change," said Gould, referring to Poilievre.

"When it comes to the Conservatives, they want to take that $1,000 out of the pockets of Canadians."

Gould also said Liberal climate policy is working, noting that Canada's emissions were 53 million tonnes lower in 2021 than they were in 2019, or the amount produced by 11 million cars over a year. 

"While they keep their heads in the sand and pretend that climate change isn't real, we're gonna fight climate change and we're gonna help Canadians with affordability."

The carbon pricing change also sparked backlash from premiers of provinces where residents rely more on natural gas for home heating and therefore would still have to pay the carbon price. 

On Monday, Saskatchewan Premier Scott Moe threatened that SaskEnergy will stop collecting the carbon price on natural gas, effective Jan. 1, if the federal government does not extend the exemption to all forms of home heating.

"The prime minister chose to make life more affordable for families in one part of the country, while leaving Saskatchewan families out in the cold. How is that fair to families here in our province?" Moe said in a video posted to X, formerly known as Twitter.

"You heard them. The carbon tax isn't about reducing emissions, it's punishment for not voting Liberal. There are no words to describe how absurd and damaging this is to our confederation," Smith posted on X.

Statistics Canada reports that in 2021, only three per cent of households nationally relied on home heating oil, while 44 per cent used natural gas and 40 per cent used electricity.

But the regional variation is large. Four in 10 households in Prince Edward Island use heating oil, as do one in three in Nova Scotia, while that falls to less than five per cent in Quebec and Ontario and to virtually zero in Western Canada. About eight in 10 households in Alberta and Saskatchewan use natural gas, as do two-thirds of homes in Ontario, and about half in both Manitoba and B.C.

From an emissions perspective, home heating oil produces about 42 per cent more greenhouse-gas emissions than natural gas to get the same amount of energy, according to data from the U.S. Environmental Protection Agency.

This report by The Canadian Press was first published Oct. 30, 2023. 

With files from Mia Rabson.

Trudeau rolls back carbon plan under

pressure from voters

Laura Dhillon Kane, Bloomberg News  Oct 26, 2023

Prime Minister Justin Trudeau suspended a carbon price on oil used for home heating, bowing to political pressure in Canada’s eastern provinces just months after the tax came into effect.

Oil is used to heat a small fraction of Canadian homes, but it’s a more important energy source for the Atlantic region’s 2.6 million residents. Trudeau said the three-year pause on the pollution levy will give those people time to switch over to electric heat pumps. 

“We are switching to heat pumps off home heating oil, as a region in Atlantic Canada and as a country,” Trudeau said on Thursday.

The announcement represents a partial climbdown on one of Trudeau’s signature climate policies. Trudeau’s Liberal Party has been sinking in the polls — partly because of the rising cost of living — and energy costs are one reason it appears politically vulnerable in Atlantic Canada, where the federal carbon price just came into effect this summer. His chief rival, Conservative Leader Pierre Poilievre, has been drawing crowds with “Axe the Tax” rallies in the region. 

The Liberals hold 24 of the 32 House of Commons seats in Canada’s four easternmost provinces. 

Trudeau also announced a pilot project in the region to install free heat pumps for people with incomes at or below the median. The government will increase the size of carbon rebate checks for people living in rural Canada. 

“If you live in a rural community, you don’t have the same options that people who live in cities do. We get that,” the prime minister said. “So this is more money in your pocket to recognize those realities even as we continue to fight climate change and build a stronger economy.”

Trudeau’s government began implementing the carbon price in 2016 to give people incentives to reduce fossil fuels. He insisted on Thursday the three-year suspension would help his government reach its climate goals, because it would help people afford the move to heat-pump technology.

However, Dale Beugin, executive vice-president of the Canadian Climate Institute, said the move introduces uncertainty to Canadian climate change policy. “It sends the signal to emitters — and investors — that policy can be weakened in the future, diluting the carbon price’s effectiveness in driving the long-term, low-carbon investments required to reduce emissions,” he said in a statement.

Moe says Saskatchewan to stop collecting carbon tax if no federal break given

Jeremy Simes, The Canadian Press

Premier Scott Moe says Saskatchewan is to stop collecting the carbon tax on natural gas if Ottawa doesn't offer a break, a move that has received unanimous support in the provincial legislature. 

Moe said Monday that starting Jan. 1, the provincial gas utility SaskEnergy won't collect or submit the tax to the federal government unless Ottawa provides the province an exemption. 

"The federal government may say that's illegal," Moe said in a video on the X platform, formerly known as Twitter.

"In most cases I would agree with that, but it's the federal government that has created two classes of taxpayers by providing an exemption for heating oil, an exemption that really only applies in one part of the country and effectively excludes Saskatchewan."

Prime Minister Justin Trudeau announced last week the carbon tax would be exempt for three years on home heating oil to address affordability needs. 

The move largely helps those in Atlantic provinces, where it's a main source for home heating.

Moe and Alberta Premier Danielle Smith have asked Trudeau to extend that exemption to cover all other forms of heating, including natural gas.

"As premier, it's my job to ensure Saskatchewan residents are treated fairly and equally with our fellow Canadians in other parts of the country," Moe said. 

Trudeau has denied the decision was about saving Liberal seats, but he did acknowledge it was something voters wanted. 

The federal government did not immediately respond to a request for comment. 

Saskatchewan's Opposition NDP said it supports Moe's move.

On Monday, NDP member Jared Clarke introduced a motion expressing concern over the exemption not applying to Saskatchewan. 

The motion also expressed displeasure with comments from Gudie Hutchings, the federal rural economic development minister, who told CTV last week that people in Western and Prairie provinces should elect more Liberals if they want to have conversations around potential exemptions.

A Saskatchewan Party member amended the motion to say the assembly supports not collecting or remitting carbon tax from natural gas if the "Liberal-NDP coalition" doesn't offer an exemption. 

The motion passed unanimously, 52-0. 

The legislative assembly is to send the contents of the motion, as well as a transcript of the debate, to Trudeau, NDP Leader Jagmeet Singh and Conservative Leader Pierre Poilievre. 

"I think there was enough agreement from both sides of the house that, at the heart of this, this shouldn't be about political games. This should be about fairness and getting relief for the people of this province," NDP Leader Carla Beck told reporters. 

Beck said she spoke with Singh's chief of staff on Monday, relaying her concerns about Saskatchewan not being exempt.

Dustin Duncan, the minister responsible for SaskEnergy, did not say how the utility would not remit carbon taxes, saying the province is still looking at its options. 

He said he hasn't spoken with his federal counterparts, adding he hopes Ottawa does not hit Saskatchewan with a legal challenge. 

"We have the ability to not follow the law and it'd be up to the federal government to decide (what to do)," he said. 

Natural gas prices have recently been lower than heating oil prices.

Alberta and Saskatchewan have long called on the federal government to scrap the carbon tax.

Beck said Moe could offer additional affordability, like scrapping various fee hikes and lowering utility bills. 

"It's pointing fingers while failing to do the things they could do today," she said.

Saskatchewan took Ottawa to court over the carbon tax in 2021, but lost its challenge when the Supreme Court deemed it was constitutional.

Along with the heating oil exemption, Trudeau announced Ottawa would increase the rebate top-up to rural Canadians.

This report by The Canadian Press was first published Oct. 30, 2023.

Saskatchewan and Alberta premiers ask for

extension of carbon tax exemption

Jeremy Simes, The Canadian Press

Two of Canada's Prairie premiers say Ottawa's decision to exempt the carbon tax on heating oil fails to address affordability needs in Alberta and Saskatchewan.

Prime Minister Justin Trudeau announced Thursday the carbon tax would be exempt for three years on home heating oil, a move that largely helps those in Atlantic provinces where it's a main source for home heating.

Saskatchewan Premier Scott Moe and Alberta Premier Danielle Smith say the exemption should also be applied to natural gas, as the majority of people in their provinces use it to heat their homes.

Smith says she's disturbed by the measure, adding it further creates a divide in the country.

"Question for the Liberal Government: Are we not Canadians, too?" Smith posted late Thursday on the X platform, formerly known as Twitter.

She wrote Friday that the federal government "has decided that one part of Canada with one type of home heating is worthy of a carbon tax break, while those living elsewhere using another type of home heating do not." 

Moe said the exemption shows the carbon tax is making life less affordable. 

"Just axe the tax on everyone and everything," Moe said Thursday on X. 

Alberta Opposition NDP Leader Rachel Notley said in a statement it's unacceptable for Ottawa to not apply the carbon tax equitably. 

“I am passionately committed to fighting climate change, reducing carbon emissions and seizing the economic opportunities that this brings," she said. 

“Yesterday, the prime minister moved Canada much further away from those goals."

She said she's to introduce a motion in the legislature that calls on "federal actions" to be applied equally, regardless of where people live or how they heat their homes.

Trudeau said people in other provinces are to also benefit from the exemption. 

The four Atlantic provinces started paying the federal carbon price in July, after provincial systems were deemed no longer strong enough to comply with federal standards.

The federal government also introduced a new clean fuel standard to offset emissions from gasoline and diesel. Both measures caused prices to spike.

Regional members of Parliament have been lobbying Trudeau for months for relief, as costs mounted in their ridings and voters grew increasingly angry about it. 

Trudeau denied the decision was about saving Liberal seats, but he did acknowledge it was something voters wanted.

Natural gas prices have recently been lower than heating oil prices. 

Alberta and Saskatchewan have long called on the government to scrap the carbon tax. 

Saskatchewan took Ottawa to court over the carbon tax in 2021 but lost its challenge when the Supreme Court deemed it was constitutional. 

This report by The Canadian Press was first published Oct. 27, 2023.

ICYMI

Air Canada accused of holding up British MP 'because his name is Mohammad'

The Canadian Press

Oct 25, 2023

Air Canada is being accused in the U.K. House of Commons of delaying a British MP from boarding a flight “because his name is Mohammad."

Clive Betts, raising a point of order in the House this week, said fellow Labour MP Mohammad Yasin was pulled aside for questioning recently at London’s Heathrow airport "for a considerable period" while other lawmakers he was travelling with were allowed through.

Betts told the House that Yasin was asked whether he was carrying a knife and where he was born. 

He said the questioning was being done by “officials from Air Canada and, we believe, the Canadian government” despite Yasin having a visa to enter Canada. 

Betts said Yasin was eventually allowed to get on the flight, but he was "challenged" again at the Montreal and Toronto airports.

He said while Yasin has received apologies from Air Canada as well as Canada’s parliamentary secretary to the federal immigration minister, it was important to put Yasin’s experiences on the parliamentary record due to their "racist and Islamophobic nature."

"We raised the issue with our high commissioner in Ottawa, who was very supportive," Betts is quoted as saying in Hansard, the official record of the proceedings. 

"She was amazed at what had happened, given the multicultural nature of Canada as an open and welcoming country. She has raised the matter with the Canadian government and appreciates that I am raising it in Parliament, to try to ensure that no one is treated in this way in future." 

Air Canada did not immediately respond to a request for comment, but the airline said in a statement reported by the BBC that it regrets any inconvenience or upset caused and that it has reached out to Yasin to apologize.

"Unfortunately Mr. Yasin was designated for additional screening prior to his flight after a security check, but he was still able to travel as planned as he was quickly cleared," the BBC reported Air Canada said.

"We are following up internally the handling of this particular matter to ensure procedures were properly followed and we have also been in touch with U.K. and Canadian authorities."

This report by The Canadian Press was first published Oct. 24, 2023.

CEO John Chen out at BlackBerry as company prepares to divide business

The Canadian Press

After a decade at the helm of BlackBerry Ltd. CEO and executive chairman John Chen will retire from the company at the end of the week.

Chen will depart on Nov. 4, according to a press release after the bell Monday from the Waterloo, Ont.-based technology firm.

Chen joined BlackBerry in November 2013, initially as an interim chief executive, with a mission to restructure the company from a smartphone maker into a cybersecurity software and services firm.

In recent months, he was working on dividing BlackBerry's cybersecurity operations from its internet of things business, which he planned to take public.

The company also told shareholders in May that it was exploring a range of strategic alternatives to enhance the value they derive from the business, dubbing the review "Project Imperium." In October, when the company announced the division between cybersecurity and internet of things, Chen said the new proposed structure would increase operational agility for the two business units. 

BlackBerry lost US$42 million in the second quarter of its 2024 fiscal year, compared with a loss of US$54 million in the same period last year.

In a letter to BlackBerry employees posted to the company's website Monday, Chen said he's saddened to be sharing the news of his retirement "with little notice." 

"However, I felt it was important that I wait for Project Imperium to run its course to avoid disrupting this critical next step for the Company; a company that so many of us have poured our blood, sweat, and tears into," he wrote. 

Chen said he joined the company with three key priorities: to repair BlackBerry's financial health as it was "just days away from potential bankruptcy"; to establish a new strategy for the company; and to set it up for long-term growth. 

"Now that each of these priorities has been achieved, the time seems right for me to leave," he said. 

Before joining BlackBerry, Chen was an electrical engineer who served as CEO of Sybase, a California-based enterprise software company.

"It has been an honour to lead and transform this iconic company over the past decade," Chen said in a news release announcing his departure.

"I'm proud to have been able to establish BlackBerry's vision of a trusted, software-defined world and to position the company to unlock value through the separation of our core business units into two separate operating companies."

Chen's roles will taken up by Richard (Dick) Lynch while BlackBerry completes its search for a permanent chief executive, the company said in the press release. 

Lynch joined the board for BlackBerry in 2013, and was previously executive vice-president and chief technology officer of Verizon Communications and Verizon Wireless, according to the press release Monday. 

Near the end of the trading day, BlackBerry shares jumped to close higher by 30 cents or roughly six per cent at $5.02 after the Globe and Mail reported on Chen's departure before markets closed. 

— With files from The Associated Press

CANADA

Higher-for-longer rates could reduce worker bargaining power: economist

Jordan Fleguel, BNN Bloomberg

The Bank of Canada’s decision on Wednesday to hold its key interest rate at five per cent is expected to bring some relief and stability to Canadian workers, but experts say turbulent labour relations will likely continue amid high living costs.

Canada has seen a number of high-profile strikes this year as workers push for higher wages amid high inflation, including an ongoing strike by workers on the St. Lawrence Seaway marine shipping route.

Now, previous Bank of Canada rate hikes appear to be having some effect as inflation slows – but higher borrowing costs have had a “devastating” effect on workers, according to University of Manitoba labour studies professor Julia Smith.

“People are struggling to pay for rent, mortgages, groceries and other basic necessities,” Smith told BNNBloomberg.ca in an email. “At the same time, companies have been laying off workers in response to the economic slowdown.”

Smith said the Bank of Canada’s decision to hold its trend-setting interest rate will provide welcome relief for workers. But she agued that the pause does little to alleviate the strain workers are already under from high borrowing costs and wages that have not kept up with the cost of living.

“If interest rates remain high, so too will the cost of living,” she said.

DT Cochrane, senior economist with the Canadian Labour Congress, agreed with Smith that the Bank of Canada’s rate hold will offer some stability for Canadian workers going forward. Despite that, he predicted that unions will continue demanding higher wages for their members with the cost of living and inflation still high.

“(Workers) spend their salaries to buy goods and the cost of those goods going up has meant their purchasing power has decreased significantly,” he told BNNBloomberg.ca in a Wednesday interview.

“We have seen some good gains in compensation for workers, but they still haven’t closed that gap.”

‘FAR TOO HAWKISH’

In Cochrane’s view, the Bank of Canada has been “far too hawkish” during its period of quantitative tightening, and he said that has left workers bearing the brunt of elevated inflation and interest rates at the same time.

The Bank of Canada has given no indication of when it will cut interest rates, and on Wednesday again indicated that it would raise rates in the future if necessary.

Cochrane made the case that the central bank should lower rates at its next decision on Dec. 6, though many economists believe the bank is likely to adopt a “higher for longer” approach, not cutting rates until 2024. 

RBC economist Rachel Battaglia contended that a lengthy period of high rates could make it more challenging for workers to successfully bargain for higher wages.

Elevated rates will bring about more economic cooling, Battaglia explained, and that will help bring down inflation over time – but it will also make it more difficult for workers to make wage gains, she said.

“Slower economic activity means less demand for workers and, consequently, less bargaining power for workers to demand the same outsized wage adjustments recorded over the last one to two years,” Battaglia told BNNBloomberg.ca in an email.

EFFECT OF WAGES ON INFLATION

Some economists argue that the recent wage gains won by unions have themselves led to upward inflationary pressure, but Battaglia said compensation-growth has come from wages simply catching up to inflation.

She noted that when hourly wages and CPI are indexed to the start of the pandemic, wage growth has just narrowly outpaced CPI, meaning real wages have only slightly increased.

Battaglia said that wage growth could start contributing to higher inflation if real wages continue to grow without a corresponding increase to productivity.

“Given Canadian productivity is on a downward trend, higher wage growth could be inflationary – warranting structurally higher interest rates in the years ahead,” she said in an email.

Cochrane, meanwhile, said that consumers have been unfairly burdened with taking on higher costs passed along to them through the supply chain.

He cited a recent Competition Bureau report that identified a growing number of highly concentrated industries with companies that have increased markups and profits overtime as competition has decreased.

Cochrane argued that workers’ wages should keep rising rise until companies are willing to take on more costs at the expense of profits.

“Why is it that workers are expected to bear all of this pain when we've seen the corporations be able to protect if not increase their own profit margin,” he said.

Consumers overestimating how low, and

how  fast, interest rates will fall: economists

Rosa Saba, The Canadian Press

With interest rates likely at or near their peak in Canada, experts say consumers shouldn’t expect rates to return to pre-pandemic levels.

The central bank is more likely to bring its overnight rate to between two and three per cent, though not anytime soon, said David Macdonald, senior economist with the Canadian Centre for Policy Alternatives.

“That’s a ways off. That’s not next year,” he said, adding that consumers may not have fully grasped this yet.

The Bank of Canada on Wednesday held its overnight rate at five per cent, after a breakneck tightening cycle from near-zero in March 2022. The overnight rate affects interest rates offered by financial institutions.

The Bank of Canada’s overnight rate was 1.75 per cent throughout 2019, before the central bank dropped it to a quarter of a point to support the economy during the onset of the COVID-19 pandemic.

The central bank is widely expected to hold rates high in the near term as it seeks to quell inflation. But even once rates begin to fall, economists said ultralow rates aren't in the cards.

The Canadian economy, and consumers along with it, is going through an accelerated paradigm shift, said TD chief economist Beata Caranci -- less a gradual shift than a cold glass of water to the face.

Caranci thinks Canadians are aware that interest rates aren’t going back to pre-pandemic levels, but she also thinks they’re too optimistic about when, and how fast, rates will go down.

Borrowers have been increasingly opting for shorter terms on their mortgages, hoping rates will be lower in a year or two, she said.

That may well happen, but it’s not a guarantee, she said.

“If you look at our forecast, if you look at the consensus on the street ... Most people have some cuts coming in by the second half of next year. But that's presumed that the economy is weaker than it is today,” said Caranci.

“One of the points I've been stressing with our clients is, the speed at which rates went up will not be the speed at which they go down.”

In a report Wednesday, CIBC Capital Markets chief economist Avery Shenfeld said the central bank will likely be able to ease its overnight rate to 3.5 per cent by the end of next year.

A term that’s often used to describe where the overnight rate may go -- or where it should go -- is the neutral rate. That’s essentially the “Goldilocks” of the central bank’s rate, explained Caranci: “It's an interest rate that allows the economy to grow neither too hot or too cold.”

In an Oct. 5 report, Caranci and senior economist James Orlando wrote that they believe the neutral rate in the U.S. is on the rise due to factors like climate change investment, changing supply chains and higher government deficits.

“A higher neutral rate means that the current policy rate may not be as restrictive as the (U.S. Federal Reserve) thinks,” they wrote.

A similar trend is at play in Canada, according to Caranci and Orlando, but Canadian consumers' high debt levels mean a lower neutral rate north of the border.

Prior to the pandemic, rates in Canada and globally had been historically low for years, said Macdonald -- because inflation had been low for decades.

Rates were as low as half a percentage point during the past decade, including for a two-year stretch between July 2015 and July 2017. Over the past 10 years, the average overnight rate was 1.27 per cent.

There are downsides to having very low rates, said Macdonald, including the fact that when recession hits, the central bank has very little room to stimulate the economy by lowering rates further.

Over the years, low rates also contributed to a housing boom, he said. The Bank of Canada’s mandate is to keep inflation in check, Macdonald said, but home prices aren’t included in the Consumer Price Index.

The seasonally adjusted average price of a home in September was $669,689, according to the Canadian Real Estate Association, a 70 per cent increase from $392,647 a decade earlier and a 216 per cent increase from $211,893 in September 2003.

This “explosion” in home prices drove substantial wealth inequality over time, said Macdonald, as anyone lucky enough to have their foot in the door at the right time saw their wealth grow, while others were left behind.

He agrees that Canadians are now in a “difficult period of adjustment,” where household budgets are being eaten up by mortgage costs, rent is on the rise and house prices are expected to moderate. That adjustment has really just begun, he said.

“We’ve still got a long way to go at these much higher interest rates and much higher inflation.”

-- With files from Nojoud Al Mallees

This report by The Canadian Press was first published Oct. 27, 2023.

Private real estate not feeling the pinch from high rates: Nuveen CIO

Sydney Punchard, BNN Bloomberg

Homeowners may be feeling the bite from elevated interest rates, but Carly Tripp says the trend has not yet caused distress in the global private real estate markets she operates in.

“Throughout the rate cycle we’ve seen some of the best financial performance in areas like housing, health care related real estate and in industrials,” Tripp, global CIO and head of investments at Nuveen Real Estate, told BNN Bloomberg in an interview.

"Market fundamentals are really strong.”

Nuveen is an American asset manager with over US$1.1 trillion in assets.

One area where Tripp notes market tightness is in the U.S. office sector – though she notes she “wouldn’t even call it distress yet.”

“Even in the U.S., where office usage is 50 per cent less of what it was pre-pandemic, we are seeing limited amounts of foreclosures,” she said.

The positives Tripp is seeing on the private real estate side contrast with how public real estate markets have been reacting to higher rates.

The S&P 500 Equity Real Estate Investment Trusts Index is down over 11 per cent this year, which marks more than 18 per cent underperformance to the S&P 500.

“While the asset class globally has plunged due to rising rates and inflation, all the things our sister asset classes are dealing with, there have been bright spots,” Tripp said.

MACRO SUPPORTS FOR PRIVATE REAL ESTATE

Tripp is bullish long-term on where the private real estate market is going, noting some macro indicators that could further support the sector.

In Nuveen’s view, “the rate cycle is mostly behind us at this point globally,” according to Tripp.

“It’s getting a little easier to pinpoint what returns should look like, what exit yields should look like and what the cost of debt should look like,” she said. 

U.S. RATE PATH

Tripp said she expects U.S. interest rates will be “higher for longer,” as the country’s central bankers have forecasted.

Economists expect the U.S. Federal Reserve will hold rates on Wednesday for the second straight meeting. Market watchers and investors will be listening closely for rhetoric from the central bank indicating how long rates could stay elevated.

INVESTMENT OUTLOOK

On investing, Tripp emphasized the importance of finding areas in the real estate market that have “macro” themes supporting them.

As an example, she pointed to health-care real estate as one likely area of value as the global population ages.

“In 2050, 25 per cent of the global population will be 65 years old, or older. That is very supportive of investing in medical office or senior housing,” Tripp said.

She also highlighted the rental housing market as an opportunity.

“In the U.S., there’s still a shortage of about three million homes, and while we are faced with an increase in supply, we expect that to shake out and equalize around 2025,” she said. “Long-term we still think it’s structurally supportive.”

PUBLIC REAL ESTATE

Though Carly Tripp is a private real estate investor, also shared some insight from her firm about public real estate markets.

“At Nuveen, our view is that the public markets offer a lot value in commercial real estate, particularly if you’re investing alongside an active manager.” Tripp said.

Nuveen is also bullish on office REITs in public markets despite recent stock pressure.

“They’re trading where they were in the early 90s and have great land-value in our opinion,” she said.

COMPETITION IS LIGHT

Tripp said Nuveen is not yet feeling the heat from competition to buy up private real estate.

“Competition is still light, access to debt is still light and liquidity is still really thin in commercial real estate,” Tripp said.

“If you’re a large balance sheet investor and you’re reliant on leverage, this is the time you can really win."

Canadian Tire buys back stake in financial services business from Scotiabank

The Canadian Press

Canadian Tire Corp. Ltd. has signed a deal to buy back the 20 per cent stake in Canadian Tire Financial Services that is owned by Scotiabank for $895 million.

The move restores the retailer's full ownership over the business.

Canadian Tire CEO Greg Hicks says the deal will give the company more control and flexibility when it comes to its Triangle Rewards loyalty program.

It also says it will evaluate strategic alternatives for its financial services arm.

The retailer says consideration will be given to the optimal ownership structure of the financial services business and its Triangle Rewards program and credit card portfolio.

Canadian Tire will record a charge of $328 million related to the transaction.

This report by The Canadian Press was first published Oct. 31, 2023.

Astronaut Jeremy Hansen talks innovation and space exploration

Daniel Johnson , BNN Bloomberg

Canadian astronaut Jeremy Hansen says space exploration can drive technological innovation and he thinks Canada can become a leader in that area.

Hansen is set to become the first Canadian astronaut to fly around the moon, as part of NASA’s Artemis Two mission.

He said in an interview with BNN Bloomberg there are many reasons to go back to the moon, some of which are scientific, but he also sees economic reasons “with respect to driving new innovation.”  

“When governments set big goals and they bring that investment money in and they buy down the risk for companies, then there's a trickle-down effect,” Hansen said, adding that there are big challenges the Canadian Space Agency can work to address. 

Some of the biggest challenges of space exploration include meeting basic needs like water, food security, and remote health care, he said, suggesting Canada could become a leader in developing related technologies. 

“There's an opportunity right now for a country like Canada to really focus in these areas and be like, ‘Okay, we want to become world leaders in doing this on the planet, and then take this to space with our international partners,’” Hansen said. 

He pointed to robotics as an example. 

“Canada is a world leader in space robotics,” he said. “We have spent decades honing this expertise in our country, and it's only just now that there is a commercial market emerging for space robotics.”

The Artemis Two mission is scheduled to take place late next year.