It’s a (Fair?) Deal….
Canadian household debt calls for ‘she-covery’
By Cydney Melnyk-Link
Recently, Statistics Canada found that Canadian household debt rose in the first quarter, reporting that household credit market debt as a proportion of disposable income rose from 175.6% to 176.9%. In other words, Canadians now owe $1.77 for every dollar they have to spend.
Hold on… What exactly is household debt?
Household debt measures a household’s consumer debts (credit cards, student loans, auto loans, leases, mortgages, etc.) over their income. Canadian household debt has been increasing over the past 20 years, while the household savings rate has declined. In the last quarter before the pandemic, Canadians were only saving $3.60 of every $100 they made.
How did COVID-19 impact household debts?
As income is a key component of household debt, job losses like the type seen in recent months will have a substantial impact on household debt. Government income supports, such as CERB and mortgage deferrals, have helped Canadians manage their debts. However, economists argue that when these supports end, we are likely to see a further increase in household debt. Chief Economist at Deloitte, Craig Alexander, argues that the debt to income ratio could hit 230%.
How can we fix this?
The best solution for economic recovery would be to have incomes return back to pre-pandemic levels. However, Canada must consider those that have experienced the brunt of COVID-related job losses.
Proportionately, women have faced steeper job losses than men, experiencing 1.5 million job losses in March and April. Advocating for what she calls ‘she-covery’, Economist Armine Yalnizyan says that we must have a nation-wide strategy for the safe reopening of schools and childcare, as these strongly impact the ability of women to work.
Women make up almost half the workforce and contribute substantially to household income; supporting women’s safe return to work is fundamental to our economic recovery.
“A Fair Deal”- With Pricey New Recommendations
By Nabeela Jivra
What’s up, Alberta?
On the heels of Bill 1 receiving royal assent, and the announcement of a $3.7 million audit of Alberta’s post-secondary system, the results of the Fair Deal Panel report were released last Wednesday. The report is stirring up controversy for being inflammatory, biased, and potentially harmful to Alberta’s economy. And, there appears to be dissent amongst the panelists themselves about the report’s contents.
So what does it say?
The Fair Deal report claims to outline the Albertan sentiment surrounding its relationship with Canada, and 25 recommendations to increase Alberta’s autonomy. These include:
· replacing the RCMP with a provincial police force,
· creating a role for a Chief Firearms Officer,
· holding referendums to withdraw from the Canadian Pension Plan in favour of a new Alberta Pension Plan,
· increasing Albertan oversight over immigration to the province
· collection of provincial and federal taxes in a format potentially similar to what Quebec follows, and
· “pressing strenuously” for increased funding from the Feds and “better representation in the House of Commons
Fun fact – commentators have pointed out that these recommendations are almost identical to those outlined by Conservatives in a “firewall letter” to Ralph Klein nearly twenty years ago.
In line with his campaign promise, Kenney reiterated that Alberta will hold a non-binding referendum on equalization payments in coming months (check out our 101 on Equalization with Dr. Trevor Tombe here)*, and open technical studies into operationalizing provincial police and pension programs.
So – how were these recommendations received by the public?
Recent polls by the CBC indicate that actual public support for the Fair Deal recommendations are much lower than Kenney claims, especially in light of the federal government’s economic response to COVID-19. Setting up a new police force and new pension program are expensive initiatives that could hurt smaller communities if they have to shoulder the cost that the federal government currently subsidizes (The Feds pay $112 million annually for Alberta policing).
To put it simply, the report is divisive.
As the roster of big moves by Kenney’s government grows – eyes on you, Alberta.
High Hopes for Canadian Biotech IPO
By Sukhmeet Singh
While 2020 has been bear-ish for most industries, the year has proven to be a good season for biotech firms. Two US biotech companies- Vasxyte Inc. and Avidity Biosciences LLC- have successfully gone public and seen their stock prices soar. Repare Therapeutics Inc., a Montreal based biotech company, is set to follow suit and is going public very soon.
A little more about the company: Repare is a biotech company that develops precise oncology drugs that target cancerous tumors. Currently, it has a particularly promising cancer drug that is set to go into human trials this year.
Why IPO? Going public is a lucrative option. It offers Repare increased exposure, better access to capital and greater liquidity. Biotech companies are also in demand this year by investors due to the heightened interest they have received since COVID-19. That being said, there are some downsides to going public as well. IPOs come with loss of control, public dissemination of information and significant filing and legal costs.
How much is it selling for? In its most recent filing to the US SEC, the company reported it will sell 10 million shares – with each share priced anywhere between US$18-$20. Additionally, the underwriters of the IPO will have the opportunity to buy another 1.5 million shares for approximately US$ 230 million. If all goes well, Repare would be successful crossing the US$1 billion valuation mark.
Many other Canadian biotech companies are watching Repare’s IPO performance as they contemplate plans to go public themselves.