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COVID-19 Bank of Canada must "keep innovating" beyond pandemic: think tank


Friday, May 1, 2020 12:00:00 PM

The Bank of Canada (BoC) must "keep innovating" to help governments support jobs, protect public services, and address critical spending challenges through the COVID-19 era and beyond, says a new policy paper from the Canadian Centre for Policy Alternatives.

"The Bank of Canada's current bond-buying program has made it possible for the federal government to shore up incomes and keep our economy functioning at a most unusual and difficult time," said Scott Aquanno, Ph.D., a professor at Ontario Tech University and author of The Bank of Canada and Crisis Management: COVID-19 and Beyond. "This demonstration of what the bank can do in a crisis has also shown what it can do to help tackle other fundamental challenges, from supporting public services and jobs to decarbonizing our economy.

"It would be a tragic mistake not to learn from the lessons the pandemic is teaching us about the Bank of Canada's capabilities."

Aquanno warned of "a new age of austerity" if governments take their cues from conservative voices already calling for cuts to program spending.

"Austerity brings about suffering at the community level. It erodes the ability of government to support strategic sectors of the economy. It impedes efforts to confront the climate crisis," he said. "Unfortunately, we are already hearing demands that governments cut spending and pay down debt.

"Such demands are based on a misunderstanding of public debt markets and the powers of central banks," Aquanno said. "If we go back to 'business as usual' at the BoC, and assume that our wellbeing depends on private debt markets, Canadians will have a grim future to look forward to."

Aquanno is calling on the federal government and the BoC to commit to comprehensive and long-term support for provincial and local governments that are already facing unheard-of budget shortfalls and lack the revenue tools available to the national government. His paper also proposes creation of a new national bank to fund public priorities, backed by the BoC but democratically controlled.

"The COVID-19 crisis has demonstrated the important role that governments play in the economy," Aquanno said. "As Canadians face an uncertain future together, an ambitious extension of the BoC's responsibilities is the most practical option."

SOURCE: Canadian Centre for Policy Alternatives