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Archived - Chapter 1: Overview

Introduction

After the deepest global recession since the Second World War, there are encouraging signs that economic growth in Canada and other Group of Seven (G7) countries will resume this fall. Global credit and equity market conditions have improved; Canada's housing market has started to recover; and consumers and businesses in Canada and the U.S. are feeling more confident.

However, many Canadian communities, businesses and workers continue to be seriously affected by the downturn. Significant uncertainty over the speed and extent of both the global and Canadian economic recovery remains. Although positive signs exist in Canada, recovery remains fragile (see box entitled "Medium-Term Economic Outlook"). That is why the Government remains committed to following through on the implementation of Canada's Economic Action Plan to help ensure recovery. For these reasons G20 Finance Ministers and Central Bank Governors committed in London, on September 5, 2009, to stay the course and follow through on their respective stimulus plans:

Canada entered this downturn in a strong economic and fiscal position. Our housing markets have avoided the problems seen in other countries, our financial system and our banks are the strongest in the world, and we have the lowest debt among all advanced industrialized countries. From this position of strength, the Government responded quickly and boldly with an economic stimulus package that ranks among the largest in the world (Chart 1.1).

As a result, the deterioration of Canada's economy has been less severe than in virtually all other major industrialized economies. In particular, the loss of jobs in Canada has been considerably less pronounced than in the United States—our largest trading partner (Chart 1.2). The unemployment rate in Canada is now one full percentage point lower than it is in the United States—the first time this has occurred in a generation. Further, the International Monetary Fund (IMF) expects Canada will be the least affected by the global downturn and that our recovery will be among the strongest in the G7.

 

Confronted with the largest global recession since the Second World War, the Government chose to run temporary deficits in order to protect and create jobs. As the recovery takes hold the deficit will recede, reflecting both the end of temporary measures in Canada's Economic Action Plan and the positive impact of economic growth on the Government's fiscal position. These stimulus measures are affordable, as evidenced by Canada's strong fiscal position.

• The federal deficit will fall from a peak of 3.7 per cent of GDP in 2009–10 to 0.3 per cent of GDP in 2014–15.
• The federal debt, measured in relation to the size of the economy, is projected to increase from 29 per cent of GDP in 2008–09—the lowest debt ratio in 27 years—to a peak of 35.5 per cent in 2010–11 (Chart 1.4). The debt ratio over the next two years will be about equal to the ratio in 2005–06, when the Government recorded a $13.2-billion surplus.
• Canada had by far the best fiscal position among G7 nations going into the current crisis, and is projected to maintain this strong position as it emerges from the recession (Chart 1.5).

 

 

Today—when it is most needed—Canada's Economic Action Plan is protecting and creating tens of thousands of jobs. It is rebuilding vital roads and bridges, building social housing, and fixing recreational facilities in communities across Canada. It is positioning our economy for long-term success through a more competitive tax system, leadership in research and innovation, and support for critical industries. That is why Canada will stay the course, and follow through on the implementation of Canada's Economic Action Plan.

The Economic Action Plan is protecting Canadian jobs and incomes by delivering a $61-billion shot in the arm to the economy (Table 1.1). It is an investment in jobs now and in our future prosperity. The Economic Action Plan is:

• Reducing the Tax Burden for Canadians: Providing Canadians with significant, permanent personal income tax relief and Canadian businesses with the lowest overall tax rate on new business investment among the major industrialized economies.
• Helping the Unemployed: Providing more investments for Employment Insurance benefits to support those who have lost their jobs and provide the training required to help Canadians get the additional skills they need for the jobs of tomorrow and to get back to work.
• Building Infrastructure to Create Jobs: Providing new infrastructure and housing funding to create jobs across Canada and ensure Canada emerges from the economic downturn with a more modern and greener infrastructure, as well as an expanded capacity to provide affordable housing to lower-income Canadians.
• Creating the Economy of Tomorrow: Improving infrastructure at colleges, universities, federal laboratories and research facilities, creating additional support for graduate students and internships, and supporting research and technology in areas such as clean energy.
• Supporting Industries and Communities: Supporting adjustment and protecting jobs in regions, communities and sectors of the Canadian economy that have been most affected by the severe downturn.
• Improving Access to Financing and Strengthening Canada's Financial System: Providing up to $200 billion through the Extraordinary Financing Framework to ensure the continued stability of the Canadian financial system and to improve access to financing for Canadian households and businesses.

Table 1.1
Canada's Economic Action Plan

	2009–10	2010–11	Total
	(millions of dollars—cash basis)
Reducing the Tax Burden for Canadians	3,020	3,180	6,200
Helping the Unemployed	2,708	3,546	6,254
Building Infrastructure to Create Jobs	9,589	6,412	16,001
Creating the Economy of Tomorrow	1,871	2,164	4,035
Supporting Industries and Communities,  Including International Partnerships to  Support the Automotive Industry	11,824	2,178	14,002
Total federal stimulus measures	29,012	17,479	46,492
Assumed provincial and territorial actions	9,691	5,045	14,736
Total Economic Action Plan stimulus1	38,703	22,524	61,228
1 Total stimulus has been revised to reflect adjustments to the acceleration of provincial/territorial infrastructure base funding, federal infrastructure spending, and the level of support to the auto sector, as well as the fact that due diligence on Canada Health Infoway will not be completed in fiscal year 2009–10. Totals may not add due to rounding.

Timely Implementation

The Government has taken unprecedented action to implement the Economic Action Plan to create or protect as many jobs as possible. In January 2009, the Government presented the earliest budget in Canada's history. By March, the Government had secured the necessary authorities to proceed with 90 per cent of the 2009–10 funding in the Action Plan. By June, the Government had committed 80 per cent of 2009–10 funding in the Action Plan.

The Government has now committed 90 per cent of the 2009–10 stimulus funding (Table 1.2). Elements of the Economic Action Plan directly controlled by the Government are largely in place. For responsibilities shared with other governments or other parties, the Government has almost all the necessary agreements in place to allow provinces, territories, municipalities and other partners to implement the measures. The timing of much of the implementation relies on the speed at which provinces, territories and municipalities make progress. Tax reductions and enhanced Employment Insurance benefits are flowing, and funds have been committed to more than 7,500 infrastructure and housing projects, of which more than 4,000 have begun. Many more will begin this fiscal year, while the remainder of these identified projects are not scheduled to start until the next fiscal year. Projects committed include:

• Over 4,700 provincial, territorial and municipal infrastructure projects.
• 1,150 projects to repair and renovate federal buildings across the country.
• 447 projects to improve infrastructure at colleges and universities.
• About 300 social housing projects.

In addition to these infrastructure and housing projects, funding has been committed to other initiatives, including projects to help those communities hardest hit through the Community Adjustment Fund, as well as support for major Canadian festivals and cultural projects.

Table 1.2
Progress in Implementing Canada's Economic Action Plan

	2009–10 Stimulus Funding	Share of 2009–10 Stimulus Committed
	(billions of dollars)	(per cent)
Reducing the Tax Burden for Canadians	3.0	81
Helping the Unemployed	2.7	100
Building Infrastructure to Create Jobs	9.6	84
Creating the Economy of Tomorrow	1.9	75
Supporting Industries and Communities,  Including International Partnerships to  Support the Automotive Industry	11.8	96
Total—federal support	29.0	90
Note: Figures are presented on a cash basis.

The Economic Action Plan is protecting and creating jobs. At the time of the budget, the Government estimated that the Economic Action Plan would create or maintain almost 190,000 jobs by the end of 2010. Since then, the Government has taken further action to protect jobs in Canada's automotive sector and made other adjustments to the Plan. As a result, it is now expected that the Economic Action Plan will create or maintain 220,000 jobs by the end of 2010. These estimates do not include the impact of the work-sharing program on preserving jobs. Over 164,000 Canadians are now benefiting from the work-sharing program.

The Economic Action Plan is achieving results. But the job is not done. The Government will complete the implementation of the Action Plan to secure a strong recovery. When this goal is met the Economic Action Plan will wind down, as planned, in line with the expected improvement in the economy by the end of 2010. This built-in "exit strategy" reflects the Government's commitment to maintain a strong fiscal foundation.

Conclusion and Next Steps

The Government has taken unprecedented steps to expedite implementation and to make sure that Canada's Economic Action Plan is having an impact now—when it is most needed.

Ninety per cent of the Plan has been committed. In every region of the country, Canadian communities, businesses, workers and families are receiving the support they need.

In the weeks and months ahead, the Government's focus will remain on effectively implementing the Plan. Specifically, this means:

• Lowering taxes for Canadians and Canadian businesses.
• Ensuring that the unemployed receive timely Employment Insurance benefits.
• Modernizing federal infrastructure to better serve Canadians.
• Improving infrastructure in First Nations communities.
• Investing in higher education, science and technology to create the economy of tomorrow.
• Providing assistance to sectors and communities affected by the economic downturn.
• Making available extraordinary financing support to improve access to credit.

The Government will also continue to work with provinces, territories and municipalities to ensure that:

• Workers have access to training when they need it.
• Infrastructure projects are launched in a timely manner.
• More social housing units are built and existing social housing is modernized.

The following chapter provides a detailed review of progress achieved in each of the six areas of the Action Plan.

The Government will provide a fourth progress report later this fall. Canadians are invited to monitor the progress of the Economic Action Plan on the Government's website, www.actionplan.gc.ca.

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