October 23, 2009
Archived - Speech by the Honourable Jim Flaherty, Minister of Finance, to the Brampton Board of Trade
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It’s great to be back at the Brampton Board of Trade.
I am going to talk about the economy and our priorities. I am happy to be here with entrepreneurs and business people in Brampton. Brampton, Peel Region, is a very important part of not only the Ontario economy but the Canadian economy.
It has gone through some difficulties, as the rest of the economy in Ontario and across the country has, during the course of the past two years. It is only with the skills and hard work of entrepreneurs and business leaders like you here today that we will be able to overcome the external economic threats that have confronted our nation for well over the past year.
That is why in addition to my time here today I’m also going to continue in Brampton this afternoon meeting with business and community leaders in a roundtable setup to get a better idea of how Canada’s unprecedented economic response, our Economic Action Plan, has worked so far and how we can make it work even more effectively.
It’s been almost four years since we became the government, a minority government. I congratulate this board of trade, which I understand has been in existence in one form or another for about 122 years. As a member of a minority government, I admire your longevity and tenacity.
We’re still there—four budgets later, four fall economic updates, an Economic Action Plan for the country, a longer-term Advantage Canada plan. We are preparing our fourth report to Canadians on the Economic Action Plan, which will be ready at the beginning of the month of December. And then over the coming months I look forward to turning to Canadians like you repeatedly and regularly, as our government prepares our next budget for 2010 and planning for beyond that.
We will rely, as we have in the past almost four years now, on the sound wisdom of Canadians in overcoming a crisis which is really of unprecedented scope. This has been the most challenging time economically since the Second World War on a global basis. We intend to follow through on our unprecedented efforts that took place a year ago in response to the extraordinary global economic crisis, a crisis whose causes did not originate in Canada, but in spite of our relatively strong economic fundamentals has had a dramatic effect on our country nevertheless.
A year and a week ago Friday, we were getting near the end of the federal election campaign in Canada and the international financial crisis was worsening. It was on that Friday morning that I made the announcement that the CMHC would purchase mortgages from our banks to provide more liquidity, make sure our banks were okay, that we would take some steps to make sure there was a level playing field for our banks compared to banks in other countries, where governments were intervening in putting funds into the banking system. We did not have to do that in our country, put taxpayers’ money into our system. But it was a time of crisis.
And even a year later, I remember vividly being in the Cash Room of the Treasury of the United States on the Friday afternoon with the other G7 finance ministers, and the conversation began with the Chancellor of the Exchequer in the United Kingdom saying his banks might not open on Monday. And would the markets open in New York on the Monday? In these international meetings this was far and away the most serious in a time of crisis.
So we did, I think, the right thing in that meeting. We tore up the many-page communiqué—these communiqués are always prepared in advance of international meetings. After some very serious discussions over the course of a couple of hours about issues like Lehman Brothers and what was going on in the banking system in Europe and in the United States, Canada looking relatively stable and we still do, we tore up the communiqué and we created a five-point plan. We took the five-point plan the next morning to President Bush. He spoke in support of it in the Rose Garden.
We then had G20 finance ministers’, IMF and World Bank meetings. Later in the afternoon, we had a meeting of the finance ministers of North, Central and South America, all of whom endorsed the plan. So by the end of the day on Saturday night, we had a five-point plan that had been accepted globally by the finance and banking officials. And that was the plan that was followed through on and eventually adopted for the most part by the G20. And we evolved through this year with the leaders’ meetings, the three of them that have been held, with the finance ministers and the involvement of the central bankers over the course of the year. But the genesis of that was that Friday about a year ago in the Cash Room of the United States Treasury.
So we came back to Canada and got to work. We realized that this was an extraordinary time without precedent in terms of the response that was going to be necessary.
We moved quickly. We cut red tape. We delivered the largest economic stimulus in Canadian history. We drafted a federal budget in record time and set new standards in getting its initiatives into the economy. And, quite frankly, the situation demanded nothing less.
I’m sure you all recall the damage being inflicted on the global economy and the chilling uncertainty as to what the turmoil at the time would mean for our families, our businesses and our communities.
I also remember what it meant for our budget process. In such a tumultuous time, normal operating procedures could not apply. Our budget had to do more and go further than previous governments had ever attempted.
The Canadian response to the global downturn was based on providing a short-term economic benefit while creating a long-term competitive edge for Canadian businesses. Had we not acted in extraordinary ways, both here in Canada and around the world, the ultimate cost would have been dramatic.
There is no question that we came very close to plunging into a profound global depression. The extraordinary and coordinated actions of the G20 nations, a response which indicated the lessons of past global turmoil had been learned, pulled us all back from the brink.
In Canada’s case, the Economic Action Plan was precisely the right medicine these tough times required. It’s medicine that is working right now.
While no one should assume hard times are behind us, there are signs that our economy is stabilizing. Those signs continue to emerge. It is tentative and early and should not lull us into believing we are out of the woods because we are not out of the woods yet.
For too many families and too many parts of Canada, including here in Brampton and Peel Region and around the world, the recession remains all too real. This is especially true for those who have lost their jobs, who are trying to retrain to make sure they can re-enter the economy, especially workers who have been long-tenured workers, and of course the effects that unemployment has on their families.
But the signs that we are seeing are encouraging. The credit picture in Canada has improved considerably compared to a year ago. This is an important part of the Economic Action Plan—access to credit and finance so that business can grow and invest and provide jobs, and finance payrolls. Government initiatives to support access to financing have helped total credit grow during the downturn, and this is quite something compared to other places such as our neighbour to the south, where growth numbers have had a minus sign attached to them.
Together with Canada’s monetary policy response, the initiatives that made up our Extraordinary Financing Framework have succeeded in lowering interest rates paid by Canadian businesses and consumers when they borrow. Canada’s housing market has started to recover while confidence among Canadian consumers and businesses has continued to climb.
In addition, while the economic recovery is tentative and is expected to remain so for some time yet, recent news on the job front has been encouraging. In September alone, more than 30,000 jobs were created, lowering the unemployment rate and building on the more than 27,000 jobs created in August. Compare these numbers to what is taking place in other countries and we have reason to be optimistic here in Canada.
The decline in employment in Canada during the last 11 months has led to a rise in the unemployment rate, currently in Canada at 8.4 per cent. Since October 2008, Canada’s unemployment rate has remained lower than in the United States. The U.S. unemployment rate currently is 9.8 per cent. This difference between the United States rate and the lower Canadian one of 1.4 percentage points is the largest differential since 1976, a full generation ago, which reflects the relative strength of our economy.
Increasingly, our Canadian resilience is getting noticed and praised. The harm caused to Canada’s economy has been less severe than in virtually any other major industrialized country. In advance of this month’s meetings in October in Istanbul, the IMF forecast that Canada’s recovery next year will be the strongest in the G7.
Our financial system, which has required no taxpayer-funded bank bailouts to withstand the credit crisis, also continues to receive praise. The World Economic Forum and more recently Moody’s Investors Service have both ranked Canada’s banks as the world’s soundest banks. This backs what we’ve been saying all along that Canada is a model for the rest of the world.
At last month’s G20 finance ministers’ meeting, the French Minister of Finance Christine Lagarde said, "I think we can be inspired by the Canadian situation. There were some people who said 'I want to be a Canadian.’"
Tim Geithner, who is the Secretary of the Treasury of the United States, has brought forward a package of reforms to the financial system in the United States. When he presented his package, he referred to the package as having the goal of being boring, just like Canada’s financial system. And I can tell you that, these days, boring has its benefits and is a credit to our country.
These accolades reflect why when the world came together, as it has over the past year to fix a broken financial system, Canada was increasingly turned to for answers and asked to lead key initiatives on bringing about international financial stability. If countries, like people, truly get tested only during a crisis, I think it’s safe to say that Canada finished at the top of our class.
It has become obvious that Canada was well prepared for the crisis that hit us about a year ago. We had paid down a lot of debt in good times. We maintained a prudent financial system. We reduced taxes as the U.S. entered into recession in early 2008 to provide both a short-term gain and long-term advantage. Canada had by far the best fiscal position among the G7 going into the current crisis. We had the lowest debt-to-GDP ratio at the outset, the smallest deficit among the G7 and the lowest forecasted overall debt coming out.
It is also clear that when extraordinary times demanded it, extraordinary, bold measures were taken in Canada. The Economic Action Plan, the earliest federal budget in Canadian history, is now protecting and creating tens of thousands of jobs.
Our Economic Action Plan is one of the largest fiscal stimulus packages in the G20. It is a two-year investment in jobs for today and prosperity for tomorrow. It has already had a measurable effect in stabilizing the Canadian economy.
According to Statistics Canada, the growth in government capital investment almost doubled in the second quarter of this year to an annualized rate of almost 16 per cent, reversing a downward trend that had been in place for more than a year. The Economic Action Plan is working because it is a broad and well-crafted strategy that provides a boost to the economy, to invest in our future with benefits targeted at Canadian workers, consumers and businesses. It is rebuilding vital roads and bridges, building much-needed social housing and fixing recreational facilities in communities across Canada.
In Brampton, recreational facilities projects include the rehabilitation of South Fletcher’s Sportsplex, work on Memorial Arena—I know the Mayor will correct me if I get any of this wrong—and improvements to the Chris Gibson Recreation Centre.
I was pleased last month to be here with Mayor Fennell to launch the start of the construction for Brampton’s new bus rapid transit service, which has the best name for any rapid transit service in the country, I think, Zoom. I think that’s terrific and congratulations to Brampton.
I look forward to continuing to participate in the public transit upgrading. I’m glad to see other projects, including major work on Chinguacousy Park, are underway in Brampton, and the federal government is contributing on the transit side about $95 million to the Zoom effort.
At the same time, the Economic Action Plan is positioning our economy for long-term success through a more competitive tax system, leadership in research and innovation and support for critical Canadian industries.
And, as we confirmed last month in our third report to Canadians, it is economic stimulus that is making a real difference in communities across Canada. Ninety per cent of stimulus funding is committed for this fiscal year. Tax reductions and enhanced Employment Insurance benefits are flowing. Funds have been committed to more than 7,500 infrastructure and housing projects, more than 4,000 of which have already begun. The plan’s goals of encouraging consumer and business spending are becoming reality.
As just one example, consider how contractors and home renovation suppliers in Brampton and across the country are benefiting as a result of the Home Renovation Tax Credit. In the second quarter of 2009, as the overall economy in Canada continued to contract, home renovation investment grew by an annualized rate of 9 per cent as Canadian homeowners seized the opportunity to support a fragile economy by investing in their own homes.
While our job numbers have been increasing in recent months, the Economic Action Plan is expected to protect and create more of them. In the Action Plan in the budget at the end of January this year, we predicted we’d be able to maintain or create about 190,000 jobs as a result of the plan. It is now expected that the Action Plan will create or maintain about 220,000 jobs by the end of 2010, and that includes the jobs protected as a result of the investment by the Government of Canada and the Government of Ontario as well in the auto sector.
Now, while rolling out the Economic Action Plan, we have been accountable to Canadians every step of the way. We are making quarterly reports to Canadians. One more is on the way at the beginning of December. They are required reading, I’d suggest, for anyone questioning the effect of the Action Plan on the country’s bottom line.
So I like describing the effect the Economic Action Plan is having on the immediate needs and future prosperity of our country. It is definitely a much better story than the prospects we were all facing during the height of the global crisis a year ago.
However, our job is not done. As the G20 leaders stated in their communiqué following the recent summit in Pittsburgh, and this was unanimously agreed to by the 20 leaders, including Prime Minister Harper: "A sense of normalcy should not lead to complacency. The process of recovery and repair remains incomplete….We cannot rest until the global economy is restored to full health."
So we must stay on track and make sure the Economic Action Plan continues to be implemented promptly and effectively. As we prepare for next year’s budget, the success of the Action Plan so far compels us to finish the unprecedented work we started and deliver on our global commitments.
Our government’s focus remains on a plan that works—the Economic Action Plan being implemented as we speak. The plan, which is one of the most comprehensive stimulus packages in the world, is intended to wind down, as planned, in line with the expected improvements in the economy by early 2011, which is a two-year plan following the announcement of the Economic Action Plan in January of this year.
It is a plan based on necessary but largely temporary measures. Much of the new infrastructure funding, for example, is for this year and next year—the proverbial "shovel-ready" projects that Canada and other responsible nations have relied on both for their short-term and long-term benefits.
The need for unprecedented yet temporary responses is also why we extended the maximum amount of time individuals are eligible for regular EI benefits this year and next year. It’s also why we froze EI rates for the same two-year period, benefiting both employers and employees.
So let me assure you today that our government will stay the course. We will continue to implement the Economic Action Plan and, once the recovery is firmly entrenched, we intend in the medium term to return to balanced budgets.
Along the way, we will neither raise taxes nor put in jeopardy the growth track of major transfers to persons—our seniors, our children, those receiving EI benefits—or transfers to other levels of government. We will not balance our budget by slashing funding to provinces and territories that is essential for the health, education and social well-being of Canadians.
The exit strategy is built into the Economic Action Plan. It means we will ensure that temporary measures end as scheduled. To do otherwise would mean putting at risk all of the advantages Canadians worked so hard to achieve: a G7-leading debt-to-GDP ratio, and an economy that was one of the last to enter a recession and that has experienced one of the smallest declines in output among our major industrialized competitors. It would mean the legacy of this global downturn for future generations would not be a more competitive economy but an unending financial burden.
Now I’ve gone on, I can tell, almost as long as it seems. While staying on course, our government will continue to put the interests of Canadians ahead of the short-term political gain that seems to be so prevalent today. Our government’s goal to support Canadians and Canadian businesses and to create the conditions for a brighter future as spelled out in the Economic Action Plan will not be put at risk.
As this unfolding global crisis has made clear, Canadians have a lot to be proud of. Canadians made our country’s world-leading economic recovery happen. The efforts of Canadians made the Economic Action Plan the successful blueprint it has become. The accumulating global praise Canada continues to receive belongs to all Canadians.
So today in Brampton and always, our government will be listening intently to what individual Canadians have to say to contribute to the common good of our great country.
Thank you for the opportunity to be with you today in beautiful Brampton, Ontario, Canada.