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Foreword

Twenty-one months ago, a global pandemic reached our shores. Few of us had any idea how long it would last or the toll it would take. Even the most prescient among us could not have imagined the scale of the task that was before us.

Yet our government did understand, from the outset, that to save lives our economy would have to be locked down. So we put in place unprecedented measures to meet this unprecedented challenge.

We supported municipalities, and we supported provinces; we supported our healthcare system, and we supported schools; we provided free vaccines and PPE and rapid tests and therapeutic medicines.

The focus of our support was also people and jobs. We helped millions of Canadians with income supports like the Canada Emergency Response Benefit and the Canada Recovery Benefit. We delivered direct payments to seniors and families. And we kept businesses going, particularly small businesses, and helped workers stay connected to their jobs with the wage and rent subsidies.

We provided this support because it was the right thing to do. We also did it because we knew it was an investment in our economy that would pay off. Our goal was to prevent economic scarring. We wanted to emerge from this with our economic muscle intact, ready, as a country, to come roaring back. Keeping the Canadian economy on life support as we went into COVID-19 hibernation was expensive. But we knew that keeping Canadian families and businesses solvent would help our economy spring back.

As Omicron has reminded us, COVID-19 threatens us still. As 2021 draws to a close, finishing the fight against COVID-19 remains our most important national project.

This Economic and Fiscal Update provides Canadians with a transparent report of our nation's finances. And because our best economic policy is strong public health policy, it also includes targeted investments that will ensure we have the weapons needed to finish the fight against COVID-19.

First, we are protecting children by making sure that Canada has the pediatric vaccines needed for children five and over to get their shots. We are also ensuring that booster shots are free for all Canadians, just as first and second doses have been. And we're investing in new anti-viral drugs for COVID-19 patients that prevent hospitalizations and can save lives.

To prevent outbreaks at schools and workplaces we are investing in ventilation improvements. We are also delivering rapid tests to provinces and territories and Indigenous communities, free of charge. And we are providing support to provinces and territories for proof of vaccination credentials so that we can all travel freely with the confidence of knowing others around us have been responsible and had their vaccine.

We also know that a critical part of finishing the fight against COVID-19 is making sure that we have the economic supports in place that allow workers, businesses, and public health officials to do the right thing. Programs like Local Lockdown Support and the Canada Worker Lockdown Benefit will ensure that, in the event of a new lockdown, Canadians and Canadian businesses will have support. And we are moving forward on ten days of paid sick leave for workers in federally-regulated businesses.

The pandemic triggered the steepest economic contraction since the Great Depression. At its worst, it cost 3 million Canadians their jobs as our GDP shrank by 17 per cent.

This was a once-in-a-generation trauma. When it first hit, many predicted it would take years to rebuild. That is why we are so pleased to report that Canada has largely recovered from the economic damage inflicted by COVID-19 and is poised for robust growth in the months to come.

We have now surpassed our target of creating a million jobs. In fact, we have recovered 106 per cent of the jobs lost at the peak of the pandemic, significantly outpacing the US where just 83 per cent of lost jobs have been recovered so far.

From the start, we understood that having a job is essential to Canadians' economic wellbeing. That is why our investments have been so singularly focused on employment, and why Canada has experienced the second fastest jobs recovery in the G7.

Our GDP returned to near pre-pandemic levels in the third quarter of this year. Our GDP growth of 5.4 per cent, in the third quarter, outpaced the U.S., the U.K., Japan, and Australia. OECD projections suggest that, by 2023, Canada's recovery will be the second fastest in the G7. This update shows the size of the Canadian economy this year will be $2.48 trillion, almost exactly what we predicted it would be in the 2018 budget when we had no idea we would soon be grappling with a global pandemic.

Canadian exports rose in October and our balance of trade for goods had a surplus of $25.1 billion.

Fewer businesses went bankrupt last year than in 2019, before the pandemic. In fact, there are now an additional 6,000 active businesses in Canada compared to before the pandemic.

Household employment income is now 7 per cent above its pre-crisis level. And Canadians have used this time when we all hunkered down to pay down their personal debt.

Our recovery from the COVID-19 recession has significantly surpassed Canada's recovery from the 2008 recession. We have already more than recovered lost jobs, a healing which took eight months longer after the much milder 2008 recession. And we are on track to recover lost GDP five months more quickly than after the 2008 contraction.

Provincial government balance sheets were sheltered from the pandemic thanks to strong support from the federal government. Provincial and territorial government revenues actually increased in 2020-21. Why? Because of substantial federal support, both through direct transfers and through Canada's COVID-19 economic response, which helped put a floor under provincial-territorial government revenues thereby limiting their deficits and debt. $8 out of every $10 provided to fight COVID-19 and support Canadians through the pandemic came from the federal government.

By delivering significant fiscal policy support to the economy and avoiding the harmful austerity policies that followed 2008, the government has helped support a rapid and resilient recovery so far. But we know there is more to do, and the future remains uncertain.

As we look ahead, we are mindful of elevated inflation. We know inflation is a global phenomenon driven by the unprecedented challenge of re-opening the world's economy.

Turning on the global economy is a good deal more complicated than turning it off. We, like other countries, are experiencing the consequences of a time unlike any other. During lockdowns, Canadians' incomes remained strong, on average, but opportunities to spend on services were severely restricted. The result was that Canadians spent more on durable goods. Without meals in restaurants, personal care, or vacations, Canadians spent their disposable income on renovations, new furniture, appliances, and even cars. It will take some time for supply chains to catch up and for our economy to rebalance itself.

We are very aware of the worries Canadians are having about paying their bills. That is why we made sure to index to inflation the Canada Child Benefit, just as Old Age Security, the Guaranteed Income Supplement, the Goods and Services Tax Credit, and other benefits for the most vulnerable are indexed. We are also delivering thousands of dollars of savings to families with young children as we work to finalize agreements for a Canada-wide early learning and child care system.

To ensure that the current rate of inflation does not become entrenched, we renewed the Bank of Canada's two-percent inflation target.

We know housing prices are a real concern, especially for those in the middle class looking to buy their first home. Addressing housing affordability remains a priority for our government. Our work is ongoing. We will take further action in the upcoming budget.

Climate change is also causing increased volatility in the economy. Recent and tragic floods in British Columbia devastated homes, farms, and critical infrastructure, and further snarled supply chains. Severe droughts, including across our Prairies, have contributed to increases in food prices.

The green transition of the global economy is underway. It is one of the great economic opportunities, and one of the great challenges, that lies before us. Our government is determined that Canada and Canadians emerge from this great transformation even more prosperous than we are today. We will ensure that there are good sustainable jobs for Canadians in every corner of the country, for decades to come.

Above all, we know that our national focus, as we emerge from COVID-19, must be jobs and growth. Measures to promote them will figure prominently in the budget.

Our government understood, from the start of this pandemic, that the best way to maintain strong public finances was by keeping our economy strong. That's what our emergency spending was able to do. This fall, Moody's and S&P reaffirmed Canada's triple-A credit rating. Our government will continue to be a careful and prudent fiscal manager.

We came into this crisis with the lowest net debt-to-GDP ratio in the G7 and, in fact, we have increased our relative advantage throughout the pandemic. We remain committed to the fiscal anchors that we outlined in this spring's budget — to reduce the federal debt-to-GDP ratio over the medium-term and to unwind COVID-19-related deficits.

It has been a hard 21 months. But we are succeeding because we did what Canadians do in a crisis — we helped each other, we worked together and we did what needed to be done, whether it was as big as the wage subsidy program, or as small as wearing a mask at the grocery store.

With winter upon us, we know that there may still be some tempests ahead. But we are resilient. Our plan is working. And, as we finish the fight against COVID-19, we will turn our resolve towards fighting climate change, advancing reconciliation with Indigenous peoples, and building an economy that is stronger, fairer, more competitive, and more prosperous.

The Honourable Chrystia Freeland, P.C., M.P.
Deputy Prime Minister and Minister of Finance

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