Peru, Australia To Sign Free Trade Deal Peru, Australia To Sign Free Trade Deal

by Mary Swire,, Hong Kong

09 November 2017

Australia and Peru confirmed that they will sign a free trade agreement, in an announcement at the ongoing APEC ministers’ meeting.

It is said that the deal will eliminate trade taxes on 99 percent of Australian product lines to Peru, slashing the current prohibitively high tax burden.

The deal will therefore significantly decrease the taxes that Australian exporters face when supplying goods to Peru, most notably agricultural sector exports like beef and dairy and mining capital goods.

Announcing the launch of FTA negotiations in May 2017, Australia’s Trade Minister, Steven Ciobo said: “Many of Australia’s exports to Peru are blocked by high tariffs that this FTA will seek to eliminate. Australian dairy and sugar exports currently attract tariffs of up to 29 percent, beef exports face tariffs of up to 17 percent, and sheep meat, wheat, rice, and wine also face tariff barriers. The United States, the European Union, and Canada all have FTAs that give them preferential access to Peru. PAFTA will help Australian farmers compete and break into this growing market.”

Published at Wed, 08 Nov 2017 19:00:00 -0500 Aus Treasury Concerned By US Corporate Tax Cuts Aus Treasury Concerned By US Corporate Tax Cuts

by Mary Swire,, Hong Kong

09 November 2017

The Australian Treasury has released a paper that considers the implications of proposed reforms to the US corporate tax system, and which warns that Australia’s GDP and real wages could be affected by the changes.

The paper examines the likely impacts of the proposed reforms on the US and on the rest of the world. The package included a cut to the US federal corporate tax rate from 35 percent to 20 percent, the expensing of depreciable assets, an exemption for dividends paid by certain foreign subsidies to US companies, and a one-time tax on overseas profits.

The paper concluded that the economic impact of the proposals “will depend on how time and compromise shape the package that is ultimately legislated.” The size of the cut, the manner in which it is funded, and the perception of investors as to its permanency are all expected to be key factors.

The paper suggested that, if a cut in the US corporate tax rate does result in a US investment boom, “the rest of the world is likely to experience reduced foreign investment and, as a consequence, lower GDP and real wages than might otherwise be the case.”

The paper noted that the impact on Australia will ultimately depend on how the rest of the world responds to any US tax cuts, and suggested that it is likely that countries may lower their own rates and/or introduce more preferential allowances for capital investment. The paper explained that this would form part of an overall trend, and pointed to the fall in the OECD-average corporate tax rate from 32 percent in 2000 to 24 percent today. It also observed that economies such as Canada, Singapore, the UK, and New Zealand have all cut their rates in the past 10 years.

Australia’s headline company tax rate is 30 percent. The small business rate was reduced to 27.5 percent earlier this year, in tandem with an increase in the turnover threshold for access to the rate. Further increases in the turnover threshold will follow in the coming years. However, the Government was unable to carry legislation to reduce the rate to 25 percent for all firms, and has re-introduced the outstanding elements of its Enterprise Tax Plan to Parliament.

Commenting on the paper’s release, Treasurer Scott Morrison said: “The paper raises serious concerns that should the US implement the Trump company tax cut, investment in Australia will potentially fall, leading to flow-on effects including lower wages for hard-working Australians and lower economic growth.”

He added: “In highlighting the risk to Australia’s international tax competitiveness, the report finds that other countries would likely respond to any US company tax reduction to avoid negative effects. Competition between jurisdictions could accelerate. A permanent reduction in GDP and real wages might become a reality unless steps are taken to maintain Australia’s competitiveness.”

Ultimately, the paper found that the impact on Australia will “depend on the cumulative effect of such changes and how Australia responds.”

The paper noted that the Treasury estimates that the size of the Australian economy would “permanently increase by just over one percent in the long term given a five percentage point reduction in the Australian corporate tax rate.” The revenue lost as a result of the company tax cut would in the long term be recovered through increased economic growth.

According to Morrison, the revenue return of cutting the company tax rate to 25 percent is estimated “to be about 45 cents per dollar of net company tax, with eight cents accruing to state and territory governments and 37 cents to the Commonwealth.”

Morrison warned: “Clearly Australia risks being left behind. It is as simple and as stark as being potentially marooned on our own tax island. The Turnbull Government gets this. That’s why we are moving to shore up our competitiveness on investment through our fully-funded Enterprise Tax Plan, which has already delivered lower taxes for businesses with turnovers of up to AUD50m (USD38.4m).”

Published at Wed, 08 Nov 2017 19:00:00 -0500

See which funds won 2017 Lipper Awards

See which funds won 2017 Lipper Awards


Canoe Financial and Mawer Investment Management were recognized under the fund group award category, for Canada, at the 2017 Lipper Fund Awards. In the ETF group award category, RBC and Invesco were recognized.

The Thomson Reuters Lipper Fund Awards honour funds and fund management firms. The awards recognize fund families with high average scores for the three-year period, as well as individual classifications of three-, five- and 10-year periods.

A full list of Canada’s 2017 fund winners can be found here; Canada’s ETF winners are here. For award methodology, go here.

Read: ETFs versus mutual funds: which win?

Published at Thu, 09 Nov 2017 12:06:33 -0500

Why mortgage life insurance may not be the best bet

Why mortgage life insurance may not be the best bet


Buying a house can be a stressful event, with more paperwork than the average consumer has ever faced. It’s not surprising, then, that first-time buyers can inadvertently sign up for something they may not need—like mortgage life insurance.

“They’re dealing with a lot all at once when signing mortgage documents,” says Aaron Keogh, president of Greendoor Financial in Windsor, Ont.

He describes a first meeting with a young couple in their early thirties. They detailed their mortgage payments and property taxes, but they weren’t sure if they had insurance for the mortgage. If something happened to one of them, how would they pay it off?

Keogh asked to see their mortgage statements. What he found didn’t surprise him. “Each month they were paying a sum that included the standard principal, interest and property tax, but the couple didn’t recall buying an insurance premium. I explained they had [purchased] mortgage life insurance through their bank.”

Inadvertently buying mortgage life insurance is a common occurrence, Keogh says. (Mortgage life insurance is also called mortgage protection, creditor insurance or simply mortgage insurance, but it’s different from mortgage default insurance or CMHC insurance, which protects a lender if a homebuyer who makes a down payment of 5% to 19.99% can’t pay the rest of the mortgage.)

As first-time homebuyers, the couple was new to the mortgage process and waded through a lot of options, but didn’t talk about insurance with the bank.

Bank employees are often “simply checking off a box on the application,” says Keogh. The couple didn’t discuss their health or disclose any pre-existing health conditions like diabetes or heart disease; the bank didn’t demand a medical examination or medical records. “You don’t have a nurse take blood and urine samples, vitals, and height and weight,” says Keogh.

That’s crucial because if one member of the couple, for example, already had diabetes and later died of a heart attack, the bank would not pay the death benefit. That would leave the widow(er) on the hook despite having made all the monthly payments.

Even if the couple still qualifies, warns Paul Shirer of Perfect Timing Financial in Toronto, “The lending institution is the only beneficiary, so they are simply taking an insurance policy on the borrower at the borrower’s cost to protect themselves. So, even if there were any money left over, the bank is still covering itself because they are the sole and only beneficiary. There is no benefit to the mortgagor even though they pay all the insurance premiums.”

Banks stress the ease of buying this insurance, which is strictly voluntary, without the need of medical exams. “Creditor insurance is a convenient and cost-effective way to help eliminate the burden of outstanding debt balances should something happen to you,” says Chris Lobbezoo, vice-president of creditor insurance at RBC Insurance.

That can be helpful for people who cannot otherwise get insured, but for others, it may not always be the most cost-effective option. According to Scotiabank, if you’re 26 years old and carry a $500,000 mortgage, you’ll pay $55 per month as you carry your mortgage. (If you’re 10 years older, it’s twice that, amounting to $33,000 over 25 years.)

Also, that $55 per month won’t change as you pay down your mortgage. That may be more than twice what a 26-year-old non-smoking male pays for standard life insurance, which can cost $20 to $25 per month (and just $15 to $20 per month for a female). The underwriting for standard life insurance is completed up front: medical records are examined, blood samples are taken, and the beneficiary (e.g., a spouse) is identified.

The Windsor couple asked Keogh if they could terminate their mortgage life insurance policy. He advised them to call their bank, and they were able to “without an issue,” he says. For those replacing their policies, Keogh suggests they buy standard life insurance and “look at income replacement insurance such as disability insurance and critical illness coverage to fill the coverage gap.”

When working with clients, make sure to read the fine print in their mortgage statements and advise accordingly.

Research shows a strong interest in Responsible Investing (RI). Do you understand the advantages of RI, what your clients are looking for and how to educate them? Get up to speed and add value to your client relationships.

® “Do well, doing good” and Meritas are registered trademarks of Qtrade Canada Inc., used with permission.

OceanRock Investments Inc. is the trustee, manager, advertiser and promoter of the Meritas SRI Funds. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values frequently change and past performance may not be repeated.

Data presented is based on an online survey of 1,084 Canadian investors conducted by Insights West from March 21 to March 30, 2017. Investors were defined as individuals who currently own investments such as mutual funds, exchange traded funds, stocks, bonds, or other securities. Download the full report:

Published at Thu, 09 Nov 2017 15:02:17 -0500

What you should know about EI benefit changes

What you should know about EI benefit changes


Parents planning to take parental leave and caregivers looking after family members will have access to benefits over a longer period when changes to employment insurance kick in next month.

Minister of Families, Children and Social Development Jean-Yves Duclos said on Thursday that changes to Employment Insurance (EI) announced in the 2017 federal budget would take effect beginning Dec. 3.

Parents with new children will have the option of extending their parental benefits over 18 months, beyond the standard 12 currently offered. That option would mean a lower rate of benefits: 33% of average weekly earnings, to a maximum of $326 per week, compared to a rate of 55% of average weekly earnings, to a maximum of $543 per week over the standard 12 months.

Expecting mothers will also be able to receive EI maternity benefits up to 12 weeks before their due date.

Read: Clients need EI? They’ll get it sooner

Changes for caregivers

The Parents of Critically Ill Children benefit has been broadened to include  immediate and extended family members of children who are critically ill, rather than just their parents. It will provide up to 35 weeks of benefits.

There is also a new 15-week benefit for those caring for a critically ill or injured adult family member.

Both medical doctors and nurse practitioners will now be able to sign medical certificates for the exisiting and new family caregiving benefits.

Family Caregiver benefits for children and adults may be combined with the existing compassionate care benefits, which provide up to 26 weeks of benefits for those who leave work to care for a family member who has a serious medical condition with a significant risk of death in the next 26 weeks.

The changes will apply to EI-eligible workers and self-employed workers who opt into EI and meet the program’s minimum income and other requirements.

The changes to EI caregiving benefits will apply to new claims across Canada, while the amendments to maternity and parental benefits offered under the EI program apply only to parents who reside outside of Quebec. The Quebec Parental Insurance Plan provides maternity, paternity, parental and adoption benefits to Quebec residents.

To be eligible for EI special benefits, including maternity, parental and caregiving benefits, individuals require 600 insurable hours of work in the 52 weeks preceding their claim. Self-employed workers may opt into the EI program and become eligible to collect special benefits. To be eligible, they must opt in at least one full year prior to claiming EI benefits and need to have earned a minimum of $6,888 in 2016 for claims in 2017.

Also read: 

Should a self-employed parent-to-be pay into EI?

Taxes for unemployed clients, Part 1

Published at Thu, 09 Nov 2017 15:08:05 -0500

Drop remaining tax proposals: Manitoba finance minister

Drop remaining tax proposals: Manitoba finance minister


Manitoba’s finance minister says the federal government should abandon its tax-reform proposals and set up an independent commission to examine ways to improve the tax system.

Read: Tax proposal summary: what’s in, what’s out

Cameron Friesen made the point to a Senate committee that is holding hearings across the country on the proposed tax changes.

He says the changes would hurt the middle class and force small businesses to cut investment and jobs.

Friesen says any changes should be part of a broad review of the tax system, similar to the Royal Commission on Taxation of the 1960s under then-prime minister John Diefenbaker.

The federal government is proposing changes that would limit tax breaks such as income sprinkling among family members for private corporations and business owners.

Read: How proposed tax changes target income sprinkling

The proposals have been criticized by business groups, political opponents and people such as physicians and farmers who incorporate their operations.

The committee launched its hearings in Ottawa on Nov. 1 with testimony from Finance Minister Bill Morneau. It has since travelled to Vancouver, Calgary, Saskatoon and Winnipeg to hear from local medical organizations, chambers of commerce and other business groups.

Senators will head to St. John’s, Nfld. on Nov. 20 to start a series of hearings on the East Coast.

Also read:

What Morneau’s achieved from his mandate letter

Published at Thu, 09 Nov 2017 15:19:31 -0500

Sun Life boss wins CEO award

Sun Life boss wins CEO award


Sun Life Financial president and CEO Dean Connor was named Canada’s Outstanding CEO of the Year for 2017.

In a release, the award program’s advisory board cites recent acquisitions, the company’s new wealth and asset management businesses, and its global business strategy—including growth in Asian markets—in recognizing Connor.

Established in 1990, the award honours an executive “who exemplifies integrity, insists upon excellence, earns the trust of others and has built a globally competitive organization.” In choosing a recipient, the board looks at corporate performance, vision and leadership, global competitiveness, innovation, and social responsibility.

Connor will receive the award at a dinner held on Feb. 22 in Toronto.

Published at Thu, 09 Nov 2017 16:16:17 -0500

Canadian equities drive pension returns in Q3

Canadian equities drive pension returns in Q3


Canadian defined-benefit pension plans, buoyed by rebounding Canadian equity returns, posted Q3 2017 returns of 0.4%, says RBC Investor and Treasury Services All Plan Universe. This marks the sixth-straight quarter of growth for Canadian pension plans. Q2 total returns were 1.4%.

Read: RRSP, pension limits are outdated, report says

Canadian equity returns reverted to positive territory with returns of 3.8% in Q3 2017, compared with -1.9 last quarter. The TSX Composite Index also returned to the black, posting returns of 3.7%, up from -1.6% last quarter.

A year ago, Canadian equities posted returns of 6.7%, while the TSX Composite posted a return of 5.5%. Resources, materials and energy helped fuel those gains.

Geopolitical activity continued to reverberate through global equity markets, which posted 1.2% returns in Q3 2017, down from 2.3% in Q2 2017 and 6.7% a year ago. Comparatively, the MSCI World Index gained 1% in Q3 2017, a decline from 1.3% in Q2 2017.

Read: Sears DB plan a reminder that savings should be diversified

Fixed income drops

Canadian fixed income returns moved lower, posting a 2% loss this quarter compared to a 1.4% gain in Q2 2017. The FTSE TMX Universe Canadian Bond Index retreated by 1.8% in Q3 2017, compared to a 1.1% gain in Q2 2017.

“The energy sector posted stronger returns in September due to a rebound in oil prices, which helped lift Canadian equities, while the bond market slipped into negative territory after strong Canadian economic growth led the Bank of Canada to raise interest rates for the first time in seven years,” says James Rausch, head of client coverage, Canada, RBC investor and treasury services. “The rate increase helped boost the financial services sector, as well as drive short-term bond yields and the Canadian dollar higher.”

He says these developments will be considered by Canadian pension fund managers as they assess their asset allocations and look ahead to Q4 and year-end returns.

Read: A closer look at goals-based investing

Historic performance of Canadian defined-benefit pension plans

Period Return (%) Period Return (%)
Q3 2017 0.4 Q2 2015 -1.6
Q2 2017 1.4 Q1 2015 6.6
Q1 2017 2.9 Q4 2014 2.7
Q4 2016 0.5 Q3 2014 1.1
Q3 2016 4.2 Q2 2014 3.0
Q2 2016 2.9 Q1 2014 4.8
Q1 2016 0.0 Q4 2013 6.1
Q4 2015 3.1 Q3 2013 3.6
Q3 2015 -2.0 Q2 2013 0.0

Also read:

Shedding light on the CPP survivor benefit

Published at Wed, 08 Nov 2017 10:31:44 -0500

Mining index posts solid gain after Q2 drop

Mining index posts solid gain after Q2 drop


EY’s Canadian Mining Eye index gained 2% in Q3 2017, following a 7% decline last quarter, reveals the firm. Increases across the board in precious and base metals drove the gain.

“As commodity prices continue to increase, appetite for investment in existing projects is expected to grow,” says Jim MacLean, EY Canadian mining and metals leader, in a release. “In an effort to improve balance sheets, companies are looking for lower-risk havens for investment, and that means investing in proven assets.”

Read: Junior mining shows ‘delicate recovery’

Key commodity price changes in Q3 are shown below.

Q3 EY Canadian Mining Eye commodity price increases
Gold 3%
Zinc 16%
Nickel 11%
Copper 9%


Regulatory risk and social license to operate appear as two of the top-10 business risks facing the sector, reveals an EY report.

From higher taxes and royalties to increased government share of ownership, governments around the world — including Tanzania and the Democratic Republic of Congo — are changing various mining laws and contributing to an uncertain investment climate for producers.

Read: Canadian mining companies know how to beat market downturns


“Improving Chinese economic sentiment and tight inventories suggest zinc prices will maintain their upward trajectory,” says Jay Patel, EY Canadian mining and metals transactions leader. “Nickel prices are expected to remain volatile due to global oversupply countered by sustained high demand for stainless steel in China.”

Read: Chinese sectors to choose — and lose

He expects copper to continue to climb, thanks to declining supply, a weakening U.S. dollar and Chinese industrial growth.

Published at Wed, 08 Nov 2017 11:04:40 -0500

ETFs contribute to market risk: IIAC president

ETFs contribute to market risk: IIAC president


The global economy is vulnerable to a “steep downward adjustment in asset prices,” partly due to the rise in index investing, says IIAC president and CEO Ian C. Russell.

In his latest letter, Russell offers insights from the Oct. 20 meeting of the International Organization of Securities Commissions (IOSCO).

Read: OSC staff members named to IOSCO

He says two conclusions emerged:

  • the risks of a steep downward adjustment in asset prices are acute and
  • co-ordination in rule-making among regulatory jurisdictions could be improved to promote greater cross-border rule harmonization.

Heightened risks for assets

Citing IOSCO chair Ashley Alder, Russell describes global economic risks, to which he adds his own concerns, including the rise in index investing.

“The emphasis on index-linked investment management, to lower costs and minimize risk, has caused all asset classes to move close together,” he  says.

Read: ETFs versus mutual funds: which win?

He thus warns that external shocks could trigger steep declines in asset prices.

“Banks and dealers have limited scope as market-makers to absorb panic selling, particularly by asset managers faced with massive exposure to falling asset prices, accelerating withdrawals of client funds as values plummet, and limited liquidity to avoid major asset sales.”

Read: Tackling tough markets

Regulators have acted to reduce fund managers’ balance sheet exposure to falling asset prices, through such measures as limiting leverage and ensuring significant holdings of liquidity.

“Regulators continue to examine the liquidity of corporate bond markets under stressed market conditions,” says Russell.

Challenges to regulatory harmonization

Russell also explains how massive regulatory reform following the financial crisis suffered from insufficient regulatory co-ordination among jurisdictions.

The result: “A global market in [over-the-counter] derivatives […] became quickly balkanized as markets were forced to centre activity within regions,” he says.

Read: CSA seeking comment on OTC derivatives proposals

That in turn led to “less choice, less liquidity and higher costs for market participants,” he says.

In the last four years, regulators have worked to modify rules and find approaches to recognize trading and clearinghouses outside home jurisdictions.

“Some successes have been achieved,” says Russell, but the challenges of competing regional concerns remain.

He notes, for example, that the EU’s regulatory initiative, MiFID II, means rules that will apply in Europe — in areas like transparency — will differ from those of other jurisdictions.

Further, he warns of the potential for continued uncoordinated global effort in the face of deregulation.

“Beyond MiFID II, the rule-making process in debt and derivative markets will continue, as U.S., European and other regulators deregulate markets to improve market functioning and capital-raising to boost growth,” he says.

While IOSCO doesn’t have authority to demand rule harmonization, the Financial Stability Board (FSB), with G20 governments as members, has authority to encourage national regulators to co-ordinate targeted rule-making, says Russell.

Such an agenda “should take priority at upcoming meetings of the International Council of Securities Associations (ICSA) with the FSB,” he says.

In his letter, he provides suggestions to achieve harmonization.

Read Russell’s full letter.

Published at Wed, 08 Nov 2017 13:37:48 -0500