Toronto-Dominion Bank’s chief executive on Thursday suggested that policymakers should take steps to both boost the spending of cash-flush Canadian consumers and ensure that those dollars are being used close to home.
Bharat Masrani said the public and private sectors “have the opportunity to work together to rebuild even better,” and that there are a number of things that could be considered, such as spurring the growth of vaccine manufacturing and other critical domestic industries.
“Second, with economies showing strong signs of recovery, we should adopt policies to encourage consumers to spend pent-up demand in local economies and support small and mid-sized businesses as they rebuild,” he told shareholders during his bank’s virtual annual meeting.
Masrani, in an interview with the Post, pointed to a program in Singapore that provides citizens 18 years and older with vouchers to support local tourism businesses. The vouchers are worth 100 Singapore dollars (about $93 Canadian).
Another “tool” available to policymakers is the sales tax, the CEO said, suggesting it could be used to entice people to shop locally and at small businesses rather than splurging overseas.
“I think it is important for us to focus on — once we open up, once we get to normal — how we make sure that these monies are spent in the local economies,” Masrani said.
For the past year, the pandemic has prevented Canadians from spending money on many of the things they did before COVID-19 arrived. The economic turbulence has also prompted consumers to be cautious with their finances, which in some cases have been bolstered by the federal government’s income-support programs.
These factors caused a surge in the overall level of household savings in 2020, which was estimated by the Bank of Canada to be about $180 billion, or roughly $5,800 per person. TD’s total deposits hit nearly $1.14 trillion for the three months ended Jan. 31, up from $908.4 billion a year earlier, before the pandemic had been declared.
Household “accumulation” of cash is still happening, since COVID-19-related restrictions on certain businesses remain in place, said Greg Peterson, the assistant chief statistician responsible for economic data at Statistics Canada.
“We haven’t seen large expenditures of those cash holdings yet,” he said.
Much of that money is held by higher-income households, but it is being closely watched by policymakers, because it could be a major driver of the economy’s growth depending on how, or if, it is used.
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Finance Minister Chrystia Freeland’s fall economic statement called the increased household savings “a preloaded stimulus” that could be deployed by Canadians. The federal government is also preparing to table a budget on April 19 that should have more to say on its stimulus plans, which could amount to another $100 billion in spending over the next three fiscal years.
“You aggregate all those things together, and there is going to be a huge amount of stimulus that’s going to be available to the economy, that’s going to create good momentum and good growth,” Masrani said. “If we can have a healthy portion of that being spent locally, I think we’ll be even better off. And I’m sure public officials are thinking on the same line.”
A survey done in March by audit firm KPMG found that 77 per cent of those polled believed the government should conduct a major economic stimulus program, which was down from 82 per cent in January. Of those surveyed, 93 per cent said they wanted the government to put incentives in place to “buy Canadian,” which was up one percentage point.
Masrani also suggested further worker training and investing in talent could be considered as part of the rebuilding efforts.
“Key sectors such as the environment, technology, digital and artificial intelligence are going to create many opportunities, and we must work together to seize them and equip our people to thrive,” he told shareholders. “After all, highly skilled talent is the competitive advantage of any economy, and this is true for TD as well.”
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