May 26 Benefits and Pensions Monitor Daily News

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Recommitment Needed To Fiscal, Monetary Anchors

Ottawa and the provinces need to recommit to fiscal and monetary anchors in light of the unprecedented stimulus response provided by all levels of government and the Bank of Canada throughout the COVID-19 crisis, says the C. D. Howe Institute. While fiscal anchors, such as debt-to-GDP ratios, were necessarily set aside to finance support programs to cope with the economic shutdown, measures to stabilize finances and restore fiscal sustainability in the medium to long-run are critical. Canada is emerging from the first wave of the pandemic with very high public and private debt loads and is increasingly dependent on domestic and foreign investors to finance them. With the loss of Canada’s fiscal anchor, maintaining investor confidence so that public and private debt can be carried at a reasonable cost is essential. Moreover, the importance of reaffirming Canada’s remaining monetary anchor, Canada’s low and stable two per cent inflation target, cannot be overstated. Its monetary and financial measures working group further recommends that governments should make clear to Canadians how they will re-calibrate and eventually remove the temporary fiscal programs currently in place, as part of a transparent plan to stabilize public finances over the medium term. To ensure fiscal sustainability, governments will likely need revenue sources beyond tax rate hikes. One avenue is through the digital taxation of economic rents realized by the few dominant players in these sectors and through taxation of individuals who have benefited from large capital gains. 

Short-Term Mortality Proportional

COVID-19 seems to increase each cohort’s short-term mortality risk by a common multiplicative factor, says research from the Pensions Institute in the UK. In other words, says ‘The Impact of COVID-19 on Future Higher-Age Mortality,’ if mortality rates rise temporarily at 10 per cent in relative terms at one age, they will also rise by about 10 per cent at other ages. The paper focuses on England and Wales and assesses the implications of the pandemic for pension funds, insurance companies, and academics who model and measure longevity risk. They found that once they controlled for regional differences in mortality rates, COVID-19 deaths in both the most and least deprived groups are proportional to the all-cause mortality of these groups. However, the groups in between have lower COVID-19 deaths – by around 10-15 per cent – compared with their all-cause mortality. Current behavioural responses to the pandemic were also examined. They observed that some surviving patients who needed intensive care could acquire a new impairment such as kidney damage, which will reduce their life expectancy. Furthermore, many people in lockdown have not sought timely medical assessments for potential new illnesses such as cancer, with the consequence that mortality rates unrelated to COVID-19 could increase in future. Other indirect consequences include increased alcohol consumption and poorer health and even suicides as a result of long-term unemployment. However, some people may retain healthier lifestyles adopted during lockdown, which could increase their life expectancy.

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