October 12, 2010
Archived - Speech by the Honourable Jim Flaherty, Minister of Finance, to the Mississauga Chinese Business Association
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- Update of Economic and Fiscal Projections
- News Release: Economic Forecast Shows Federal Government Is on the Right Track
Check Against Delivery
Good afternoon, ladies and gentlemen. I’m very pleased to be here today. It’s a pleasure to address the Mississauga Chinese Business Association. Thank you for the opportunity and that welcome.
I’d also like to thank Bob Dechert for his good work representing the people of Mississauga–Erindale and for his help in organizing this event here today.
I’m told that the first Chinese arrived in British North America in 1788—a group of 50 to 70 labourers, carpenters and shipwrights who landed at Nootka Sound on Vancouver Island.
Since that time, in spite of discrimination in the past, Chinese Canadians have served this country with honour and distinction.
Take Douglas Jung, for example.
Born in Victoria in 1925, he and a group of young men from British Columbia enlisted in the Canadian Army during World War II to put their lives on the line to defend Canada and the world’s freedom. For that, we will always be thankful.
After the war, Jung graduated from the University of British Columbia and was called to the British Columbia Bar in 1954. In 1957, he was the first Chinese-Canadian elected to Parliament—a Progressive Conservative MP.
I am proud that, after many years of calls for an official Canadian government public apology for the Head Tax, Prime Minister Stephen Harper delivered a message of redress in the House of Commons, on June 22, 2006, calling it a “grave injustice.”
Were he alive today, I’m sure Douglas Jung would fully support the work of your association on behalf of the Chinese business community, particularly your goal of promoting a society and economy based on private enterprise and concern for the individual.
I share your commitment to that important objective.
Today, I want to highlight our Government’s economic and fiscal leadership during some extremely challenging times.
To do so, let me turn the clock back a couple of years.
The worldwide economic and financial crisis that began in 2008 was the worst to hit the global economy since the 1930s.
It came from abroad and side-swiped the Canadian economy.
Fortunately, Canada had a lot of advantages going into the crisis that mitigated the impact on Canadians.
We had a prudent mortgage market. Our lenders demonstrated responsibility and restraint. As a result, we did not have the housing crisis our southern neighbour is still coping with.
Our banks have remained solid and Canada did not suffer a single bank bailout or failure.
On the fiscal side, our Government paid down significant amounts of debt when times were good and kept our debt-to-GDP ratio well below our G-7 counterparts.
As a result, when the crisis hit we were able to respond quickly and boldly with Canada’s Economic Action Plan to support our economy, including ensuring the availability of capital.
The Economic Action Plan created jobs, supported small and medium-sized businesses, and helped families during the worst of the global economic downturn.
For example, during the economic crisis our economy faced the serious problem known as the “credit crunch.” Quite simply, banks and other financial institutions were not lending money. The result—families couldn’t get mortgages and businesses couldn’t get loans.
To fix this serious threat to the Canadian economy, our Government instituted a simple market-based program to purchase insured mortgages from banks. This injection of capital gave the banks the confidence they needed to continue to lend money to those who needed it.
This was an example of the Government using market forces to support our families, businesses and banks.
The Economic Action Plan was, in fact, among the world’s largest stimulus packages—about 4 per cent of GDP and a $62-billion shot in the arm for the Canadian economy. It has been integral in boosting economic growth and creating and protecting Canadian jobs. And it has underpinned a solid and enviable economic recovery.
Taxes have been reduced, EI benefits have been extended for the unemployed, and much-needed improvements to Canadian infrastructure have taken place across the country.
Economic Action Plan funds have been committed to over 23,000 projects across the country. Of these, close to 22,500 have begun or have been completed.
In its first year of implementation, the Economic Action Plan has delivered over $33 billion in stimulus to the Canadian economy.
And, this year, the Action Plan is on track to deliver a further $29 billion in federal, provincial, territorial and municipal stimulus spending.
Put simply, during the past 17 months, a great deal has been achieved. The Economic Action Plan is working.
While Canada is doing well compared to other advanced economies, there is a great deal of uncertainty in the global outlook.
I recently returned from Washington, where I chaired meetings of G-7 and Commonwealth finance ministers, and I can tell you there is still a great deal of work to do to secure the global economic recovery.
However, the situation in Canada is more encouraging.
Let me give some of the reasons why.
Canada’s Economic Action Plan, along with Canada’s strong fundamentals, including a sound financial sector and strong corporate, household and government balance sheets, and well-anchored monetary policy, has allowed Canada to weather the global recession better than most other industrialized countries.
Canada is the only G-7 country to have virtually recouped all of the economic activity lost since the start of the recession.
As a result of Canada’s solid economic performance over the recovery to date, nearly 423,000 jobs have been created in Canada since July 2009, more than were lost as a result of the global recession.
This strong performance contrasts sharply with labour market developments in the United States.
Employment in the United States remains well below pre-recession levels and the United States’ unemployment rate remains near a 27-year high. Our unemployment rate has fallen to 8 per cent, more than 1½ percentage points below that of the United States.
We are taking further action to support the Canadian economy, Canadian families and Canadian job creators. Less than two weeks ago, our Government announced that it will reduce planned increases in EI premiums.
We reduced the planned increases from 15 cents to 5 cents per $100 of insurable earnings in 2011 and 10 cents for subsequent years. At a time when every dollar counts to businesses and families, this could mean almost $75 extra in the budget of an average Canadian family, and Canada-wide it will amount to $1.2 billion back in the pockets of workers and job creators next year.
The Government will also consult with Canadians about ways to build on the improvements we have already introduced to the EI system.
Looking to the future, the economy remains our Government’s number one priority.
We will support job creation and economic growth by completing implementation of Canada’s Economic Action Plan.
While the economy is our number one priority, we also plan to combat the abuse of our immigration system by human smugglers.
And we will keep taxes low and exercise fiscal restraint.
Within this context, I am here today to release the Government’s annual Update of Economic and Fiscal Projections.
I am pleased to say that the fiscal projections set out in today’s update show the Government’s plan is on track.
By winding down the Action Plan as the economy recovers and implementing the savings measures announced in Budget 2010, the deficit is projected to decline from $55.6 billion in 2009–10 to $29.8 billion in 2011–12, and to a small deficit of $1.7 billion in 2014–15.
By 2015–16, the federal budget is projected to record a small surplus of $2.6 billion.
The plan to bring the budget back to balance will ensure the federal debt, measured relative to the size of the economy, resumes its downward track by 2012–13.
Canada’s federal debt in relation to the economy will decline to 30.8 per cent at the end of the projection period.
Our Government’s commitment to return to balanced budgets stems from our fundamental belief that private sector, job-creating businesses like yours must be Canada’s engine of growth—not government.
The role of government is to provide the infrastructure, programs and services for a prosperous economy and society at levels of taxation that are competitive and sustainable for the long term.
Canada is a global leader in terms of maintaining sound public finances—our debt levels are low historically, they are low internationally, and more significantly, they are projected to remain low going forward. Canada’s fiscal situation remains one of the strongest in the world.
The International Monetary Fund projects that Canada’s total government fiscal position—that of the federal, provincial-territorial and local governments combined—will be broadly balanced by 2015, the best fiscal position of the G-7.
Balancing the budget and maintaining sound public finances ensure that Canada’s social and economic infrastructure is sustainable for the long term.
While Canada’s economic and fiscal position is solid, as a trading nation we are not immune to economic conditions outside our borders.
Last week, I met with a group of Canada’s leading private sector economic forecasters to discuss the economic outlook and the risks surrounding the outlook.
The private sector economic forecasters fully expect our economic recovery to continue, and are projecting that growth in the second half of this year and the first half of 2011 will continue to be moderate. According to the average of the private sector economists’ forecasts, real GDP growth is expected to be 1.8 per cent in the third quarter of 2010 followed by growth of about 2.5 per cent over the next three quarters.
They also highlighted that the near-term global economic outlook remains uncertain, with the balance of risks tilted to the downside.
Current global challenges, particularly the uncertainty surrounding the strength of the U.S. recovery, pose a risk to the Canadian economic and fiscal outlook.
In light of the downside risks in the near term to the global outlook, the Government has judged it appropriate to adjust downward the private sector forecast for nominal GDP for fiscal planning purposes.
This was suggested by many of the private sector economists I met last week.
The Government will continue to keep a close eye on economic developments to ensure this risk adjustment remains appropriate.
In spite of these global risks, the economic and fiscal outlook for Canada remains very positive.
Major international financial organizations recognize the strength of the Canadian economy.
For example, the IMF expects that Canada will continue to lead the major advanced economies in average economic growth over both 2010 and 2011.
Furthermore, the IMF projects that Canada will maintain a low and declining debt-to-GDP ratio that will be far below those of other G-7 nations.
The IMF is hardly alone in its praise. The Government’s bold response and outstanding results have generated additional widespread international recognition.
The Economist Intelligence Unit’s global business rankings forecast for 2008–2012 notes that Canada has the fastest economic growth in the G-7. It also ranks this country as the best place in the G-7 to do business for the next five years.
A World Economic Forum official recently stated that “at a time when many countries are struggling with weak financial institutions and macroeconomic stability, these are areas where Canada remains a world leader, retaining its number 1 rating for the perceived strength of its banks for the third year in a row.”
And an OECD official recently commented about our economy: “I think Canada looks good—it shines actually. Canada could even be considered a safe haven.”
- The OECD also commended the Government for our elimination of all remaining tariffs on imported capital goods, calling this measure “particularly noteworthy in light of the feared resurgence of protectionist instincts during the crisis.”
Any nation in the world would be proud to claim such endorsements.
I heard more of the same last week when I was in Washington D.C., where I hosted a G-7 working dinner and chaired the Commonwealth Finance Ministers Meeting.
These meetings focused on the outcomes and priorities set at the G-20 summit in Toronto in preparation for the upcoming G-20 meeting in Seoul, November 11–12. The Commonwealth Finance Ministers Meeting provided a forum for dialogue between G-20 and non-G-20 Commonwealth nations, focusing on the world economy, environmental sustainability and debt relief issues.
We have had a remarkable year as chair of the G-7/G-8. Starting with our “back to basics” meeting in Iqaluit, to the G-8 and G-20 summits in Huntsville and Toronto, to the meetings last week in Washington, Canada has been playing a leadership role in shaping global actions on the economy.
Our regulatory approaches and financial stewardship have served as an example to many countries around the world, which have taken their cue from the Canadian example.
Now I know I have gone on almost as long as it seems, so just let me say that as we prepare to pass the torch to next year’s G-7/G-8 chair, we recognize that there is still work to do—here in Canada and on a global scale—to secure the global economic recovery.
In order to maintain and protect Canada’s enviable fiscal position, Budget 2010 set out a three-point plan to return to budgetary balance.
- First, we will end the temporary stimulus measures contained in the Action Plan as the economy recovers;
- Second, we have announced a number of targeted measures to limit the growth of direct program spending; and finally,
- The Government is undertaking a review of its administrative operations, aimed at reducing overhead costs and improving service delivery.
Our Government will continue to follow the vigilant and responsible approach that has put Canada in a position other nations can only envy—well-prepared going into the turmoil, and with a competitive edge going out.
Three weeks ago, members of our Government returned to Parliament to finish the job we started at the outset of the worldwide economic crisis.
Our primary focus remains the economy.
We will continue to implement the Economic Action Plan to ensure the economic recovery gains traction—and that the turbulent economic past becomes an ever-shrinking blip in our rear-view mirror.
We will keep taxes low and exercise fiscal restraint.
We will continue our efforts to create jobs, boost investment and strengthen our nation.
As a result, Canada will exit the recession even stronger than it entered, with a competitive tax system encouraging higher levels of business investment, renewed infrastructure and skills, a significant tariff advantage, less red tape and a more prominent voice as a global financial sector leader.