Charmaine’s comment: The prediction is that if there is going to be growth in the economy due to the Liberal Infrastructure program, this could lead to an increase in mortgage interest rates sooner than previously expected.
- The federal Liberal Party, led by Justin Trudeau, appears likely to have taken 184 seats (54% of the newly expanded house) in last night’s election, a strong gain from the 36 seats (12%) held pre-election; handily passing the 170 seat threshold required for a majority government.
- In their election platform, the Liberal party promised a revamping of the tax system and increased infrastructure spending, supported by deficits. Highlights include a new Canada Child Benefit, tax reductions targeted at middle income earners, and the creation of a new tax bracket for those earning more than $200K per year.
- While it is difficult to assess potential impacts with any certainty at this early stage, the Liberal infrastructure program could boost annual growth in 2016 and 2017 by up to 0.1 and 0.3 percentage points, respectively.
- Markets were noisy overnight, but the Canadian dollar has since recovered relative to yesterday’s close. Over the longer term, there is the potential for upward pressure on longer term yields resulting from increased deficit borrowing, but any impact is likely to be quite small given Canada’s favourable debt position relative to other countries, and the relatively small size of the additional borrowing.
From: Observation – TD Economics Oct 20th, 2015