January 31, 2011
Speech by the Honourable Jim Flaherty, Minister of Finance, on the Release of the Seventh Report to Canadians on Canada’s Economic Action Plan
It’s great to be here today. I thank all of you for being part of today’s announcement. It’s good to have Minister Fantino here. As a Minister, he is already making an important contribution to our government’s team and advancing the cause of Canada’s seniors.
Now, as we’ve consistently said for two years, the economy remains our government’s number one priority. With the economic recovery still fragile, we continue to focus on creating jobs and economic growth. This morning, we have some more figures. Monthly GDP increased 0.4 per cent in November, the largest increase since March 2010. GDP growth in November was above expectations of a 0.3-per-cent increase.
And today on behalf of Prime Minister Stephen Harper and the Government of Canada, I am pleased to announce the release of the Seventh Report to Canadians on Canada’s Economic Action Plan, and what the report means for this country and our collective prosperity now and into the future.
This award-winning facility is certainly an ideal location for such an event. The $2.5 million invested as part of the Economic Action Plan here has helped enable the Earth Rangers Centre to become one of Canada’s greenest and smartest buildings and a global model for sustainable technology. I congratulate all involved, including Mr. Schad, who is the Chairman of the Board and one of Canada’s great innovators.
Through worthy investments such as this one here in Vaughan, our Economic Action Plan has proven to be dynamic and ambitious and a successful strategy to respond to what has been an unprecedented global crisis. The Action Plan helped steer our nation through the deepest global recession since the 1930s, stimulating economic activity in the short run while never losing sight of our long-term priorities.
In the past two years, the Economic Action Plan, since it was launched, has accomplished a great deal. And while the first phase of our government’s extraordinary response to the economic recession is nearing an end, the Economic Action Plan will continue to play an enormous role in reaching the economic potential of this country and increasing the living standards of Canadians well into the future.
While the economic recovery remains fragile, Canada’s Economic Action Plan did shield Canadians from the worst of the financial crisis. The Plan is now positioning Canada to succeed in what is a highly competitive global economy.
Without question, global economic stability is far from assured. As the candid conversations I had with political and business leaders in the last several days in Davos made clear, the world is not lacking in challenges. Other nations continue to grapple with potentially unsustainable public debt loads and lingering concerns over their financial systems. Such continuing public unease globally makes Canada’s economic performance all the more remarkable.
Two years after introducing the Economic Action Plan, Canada has come out of the global darkness in the strongest fiscal position in the G-7. Canada is on track to return to balanced budgets over the medium term before other G-7 countries do.
Close to 400,000 jobs have been created in Canada since July 2009, when the recession ended. This is the strongest performance of any G-7 nation, virtually offsetting all of the jobs lost during the recession. And the jobs that have been created in Canada are good jobs. Close to 85 per cent of the jobs created have been full-time. Close to 90 per cent have been high quality jobs in high wage industries.
So this performance means that, even with a fragile global recovery, the private sector job creators and hard-working entrepreneurs in Canada can resume their role—the role of driving the Canadian economy—while the government focuses on the long-term priorities of Canadian families.
Now, how did we emerge from a global downturn with such an attractive competitive edge? By acting decisively and quickly at the onset of the crisis with a $60-billion boost to the Canadian economy over two years, which is the Economic Action Plan that we announced almost exactly two years ago, on January 27, 2009 in the budget. That was the earliest budget in Canadian history in order to respond to the very serious economic situation that Canada and the world were facing at that time.
So, in all, more than 26,000 projects have been completed or are underway across the country, initiatives that have created local jobs, supported communities large and small, and renewed Canada’s research and science base.
We bolstered the bridges that connect neighbourhoods and refurbished the community centres that bring communities together.
We improved the infrastructure at our colleges and universities, the places our children and grandchildren start their careers and where experienced workers are returning as they transition to new and better jobs.
We responded to the needs of First Nations communities by investing in housing and infrastructure, including social housing.
We provided temporary support for the industries hardest hit by the global recession such as the forestry industry and the auto sector, while acting during a credit crunch to make sure financing options were available until normal levels of private capital returned.
And when circumstances demanded it, we demonstrated the flexibility needed to ensure the Economic Action Plan unfolded as effectively as possible.
For example, to maintain the momentum of our economic recovery, our government strengthened Employment Insurance benefits. We limited the increase in EI premiums for 2011, and when it became clear that a small number of projects were at risk of being delayed for a variety of reasons, our government extended the deadline for infrastructure construction under four Economic Action Plan funds from March 31st of this year to October 31st to encourage construction activity and the economic spinoffs that come with it.
In addition to providing the temporary boost the situation demanded, the Economic Action Plan also included tax relief that not only provides an immediate economic jolt but a long-lasting benefit and a competitive advantage for Canadians and Canadian job creators. Permanent personal income tax relief under the Economic Action Plan allows hard-working Canadians to keep more of their earnings.
Even before the economic storm clouds approached, the government reduced the tax burden for Canadians permanently. Likewise, we have long recognized that a competitive tax system encourages businesses to invest more in all sectors of the Canadian economy. This investment generates improvements in productivity, leading to wage increases, the creation of new jobs, stronger economic growth and a higher standard of living for Canadians. That is why we are committed to keeping taxes low for job creators in Canada.
Next year, the federal business income tax rate will be 15 per cent. Combined with the efforts of provincial governments, who have been cooperative and who have accepted the challenge of moving toward a Canadian advantage—a Canadian brand—Canada’s corporate income tax rate is on track to be generally 25 per cent overall as of 2012–2013. As the report notes, 110,000 job-creating businesses are benefiting from our corporate tax reductions. This started back in 2007.
By establishing in 2007 a 25-per-cent target for the combined federal-provincial-territorial income tax rate, we branded Canada as a low-tax jurisdiction for investment. Just as important, we did not let the recession throw us off track. The Harper government’s job-creating low-tax plan for the economy has helped us get through the worst of the global recession.
So today, as a result of federal and provincial business taxes changing, Canada leads the G-7 with the lowest overall tax rate on new business investment, where just a few years ago we badly trailed some of our key competitors. Canadians can count on benefiting from permanent tax relief that is broad-based and fiscally sustainable.
Canadian job creators can also count on another permanent benefit that sets our nation apart for all the right reasons. Over the course of the last two budgets, we announced the elimination of all remaining tariffs on machinery and equipment and manufacturing inputs.
As a result, Canada will be the first tariff-free zone for industrial manufacturers in the entire G-20. By lowering operating costs for Canadian manufacturers and processors, this tariff relief will increase investment, create jobs, encourage innovation and productivity, and serve as just another example of our increasingly attractive environment for business and investment.
Looking back, our actions were bold but the crisis situation Canada and all countries found themselves in demanded nothing less. Now, with just about two months before the lion’s share of the Economic Action Plan stimulus is scheduled to end, Canadians can rest assured that the long-term benefits of our plan will continue to strengthen and grow Canada’s economy.
After having achieved so much, we must now set the stage to achieve even more—more jobs, an even stronger economy, and an even higher quality of life for Canadians, so we can again be in a position to withstand whatever global economic winds bring our way.
In its initial phase, the Economic Action Plan is providing $60 billion in temporary and targeted measures to protect Canadians and protect our economy during a crisis. The Action Plan played a critical role in supporting the Canadian economy during the recession and is making a difference during an economic recovery that has now been underway for the last five consecutive quarters.
But we must also remember what made that quick response possible. Just as we introduced tax relief before an economic recession, we also used surplus budgets to pay down significant amounts of debt when times were good. In other words, we prepared.
Going into that global economic turmoil, we kept our net debt-to-GDP ratio well below our G-7 counterparts. That gave our government much more room to manoeuvre once the economic boost was needed. It meant we could set in motion bold and innovative initiatives to support our economy without creating the structural deficits that are all too commonplace elsewhere.
Now we must go into the next phase—returning to balance through a three-point plan of action. First of all, we are ending the temporary stimulus measures contained in the Economic Action Plan, subject to the exceptions I mentioned earlier. Secondly, we are limiting the growth of direct program spending, which we’ve already started to do. And thirdly, we are reviewing the administration operations to reduce overhead and improve service delivery.
With this approach, we project the federal deficit to decline by one-third in 2011–12 and to fall to less than one–half of this year’s deficit in 2012–13. And, unlike most advanced economies, our medium-range goal of a balanced budget by 2015 is an achievable goal, supported not by overly optimistic forecasts and crossed fingers, but supported by the prudence we showed in the past and the discipline that is guiding us now.
So with this Seventh Report to Canadians, we look back as we near completion of two years of successful implementation during phase one of Canada’s Economic Action Plan. The upcoming federal budget will set out our direction for the road ahead as we transform our current status as a global success story into an enduring legacy of economic excellence. We will continue our post-crisis efforts to bring government budgets back to balance over the medium term while focusing on investments that will create jobs and bring about greater prosperity for all Canadians.
Investments like this one here in Vaughan, which with federal support has become a premier site for environmental and energy efficiency education to our children.
The values we share with Canadians—hard work, living within your means, reducing waste and duplication—will continue to guide our government as we move forward.
Canadians have every reason to be proud of how well they steered through some very difficult conditions that came from outside our country.
Now, backed by a solid plan and a world-leading economic performance, Canadians have every reason to be confident about what lies ahead.