April 25, 2014
Archived - Speech by the Honourable Joe Oliver, Minister of Finance, at a breakfast hosted by the Economic Club of Canada
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Good morning ladies and gentlemen and thank you very much, Russ, for the kind welcome. For over ten years the Economic Club of Canada has played an important role in bringing insight into the important issues facing our nation. I am especially pleased to be here in Calgary among friends.
I want to particularly recognize two of my colleagues: Rona Ambrose, Minister of Health and Member from Edmonton–Spruce Grove, as well as Deepak Obhrai, Parliamentary Secretary to the Minister of Foreign Affairs and for International Human Rights and Member of Parliament from Calgary East. Both my colleagues have played an important role in representing their constituency in Calgary, Alberta, and the entire country. We all owe them a debt of gratitude.
Let me start by saying that I believe in Alberta’s great economic potential and innovative spirit. As a former Natural Resources Minister, I have witnessed it first-hand and I have promoted it around the world because Alberta plays a key role in Canada’s prosperous future. You have attracted the world’s attention. Yours is a story of hard work and ingenuity and untapping resource wealth in creative and sustainable new ways, and of course it goes beyond resources.
Today I would like to talk about Alberta and Canada’s economic and financial story, about our fiscal resilience and our plan to ensure that we remain a world leader in an uncertain global economy. It may not be the world’s most exciting story for some people. After all, it’s about hard work, ingenuity, low taxes, fiscal discipline and long-term thinking. It is, however, about a country that works, where businesses, families and communities succeed. It attracts people from around the world because of its quality of life and unbridled opportunity.
Let me begin with the basic fact that Canada’s fiscal fundamentals are solid and sustainable, and that’s thanks to the leadership of our Prime Minister Stephen Harper and my predecessor, the late Jim Flaherty, who left us far too soon.
In 2006, when our Government assumed office, the world was a different place. Markets were booming. Economic growth was strong. But economic clouds were gathering, and our Government recognized this and prepared for it long before the storms reached our shores.
We paid down the federal debt. We cut taxes for families and job-creating businesses. And we set out an ambitious plan to renew Canada’s aging infrastructure. In 2009, when we reached the depths of the Great Recession, our Government acted quickly. It acted decisively but not excessively and fared better than most.
We introduced the Economic Action Plan that funded thousands of critical infrastructure projects, including the construction of roads, bridges and border crossings, as well as knowledge-based infrastructure like research labs, universities and colleges and broadband Internet access in rural areas.
Fast forward to today and you can see that those actions are paying off.
- Canada has enjoyed the strongest employment performance in the G-7 since 2006.
- Since 2005 Canadian households have seen a near 10% increase in their after-tax inflation-adjusted incomes under our Government and more than a 45% increase in net worth, actually 80% since 1999.
- Canada has the lowest total government net debt burden of any G-7 country, half the average of the G-7.
- Both the International Monetary Fund and the Organisation for Economic Co-operation and Development expect Canada to be among the fastest growing economies in the G-7 over this year and next year.
Today we stand among just a handful of nations with a Triple-A credit rating with a stable rating, that is to say no concerns about a decline, better than the United States.
Government of Canada bonds remain the most sought-after investments in the entire world.
While it is gratifying to highlight Canada’s economic strengths, we also know we cannot afford to be complacent. Today’s advantage will not carry into tomorrow simply by sheer luck or even good intentions. In an all-too-volatile world and a world in which the global economy is fragile, there is no substitute for decisive action and hard work. Though our risks come from beyond our borders, they bring with them the potential for severe consequences to the Canadian economy.
As the G-20 and IMF meetings I attended in Washington earlier this month made clear, the global economy remains fragile. In the Eurozone growth is slow and inflation is low, emerging economies are subject to volatility and a new geopolitical risk has reared up in the Ukraine. The result is that our economy has been restrained by weak export markets and declines in commodity prices. The message is clear: competing in such an uncertain world means sticking to proven strategies and continuing with plans that work.
Let me cite one example where we can do more. Capital markets are overwhelmingly countrywide and international rather than interprovincial. That is why every developed country in the world has a securities regulator that spans the entire country, except for Canada. As an investment banker and securities regulator, I witnessed first-hand the inefficiency that results from having a system of 13 provincial and territorial regulators operating in Canada. The result is added cost, regulatory uncertainty, weakened enforcement and an uneven oversight of systemic risk.
The Supreme Court of Canada provided a roadmap for making progress on securities regulation under our Constitution, that is, for governments to voluntarily delegate the administration of their jurisdiction in securities markets to a single organization.
Last September the governments of British Columbia, Ontario and Canada signed an agreement in principle to establish such a cooperative market regulator. We hope that other provinces will soon agree to join, and the Government of Canada will definitely do its part to facilitate their participation in this important initiative.
Yesterday I had the opportunity to discuss this issue with Premier Hancock and Minister Horner. I pointed out that were Alberta to join, the province would play an important role in policy development and in governance, including an office in Calgary which would be a centre of excellence for oil and gas companies.
I believe that Alberta has the opportunity to be a more robust decision maker in the regulation of Canada’s capital markets than it is now in practice. I am not going to pretend that they were immediately convinced but it was a good discussion.
In February our Government introduced the latest chapter of Canada’s Economic Action Plan. It focuses on job creation and economic growth while it remains on track for a surplus in 2015. It is built on five pillars.
- The first pillar is to keep taxes low and create a strong business climate.
- Second, connect Canadians with available jobs by helping them to acquire the skills that will get them hired or help them get better jobs.
- Third, open new markets to help businesses succeed in the global economy.
- Fourth, responsibly develop our natural resources.
- Finally the fifth pillar is to invest in world-class research, innovation and technology.
Let me address the first pillar—keeping taxes low and creating a strong business climate.
Our Government firmly believes in reducing taxes. It has been a priority of our economic strategy since the day we took office. It is a belief we have put into action. We have delivered tax reductions totaling more than $60 billion to job-creating businesses in the past five years.
Among these tax measures are the reduction of the federal general corporate tax to 15% in 2012 from 22% in 2007, and an extension of the temporary accelerated capital cost allowance for manufacturing and processing machinery and equipment through 2015.
Canada now offers the lowest overall tax rate on new business investment in the G-7. The competitiveness of Canada’s business tax system is supported by third-party analysis. The KPMG publication Competitive Alternatives 2012 concluded that Canada’s total business taxes are the lowest in the G-7 and more than 40% lower than those in the United States.
At the same time, since 2006 our Government has provided significant tax relief for Canadian families and individuals. For an average family of four, taxes have been cut by close to $3,400. In addition, seniors are now receiving about $2.8 billion in additional targeted tax relief as a result of our actions. When combined with broad-based tax relief, this represents a saving of more than $3,000 for an average senior couple.
A New York Times study just found out that the median after-tax income in Canada has never been higher and is higher than any of the other peer countries surveyed including the US, France, Australia and the UK.
By ensuring more money stays in their pockets, we have given individuals and families greater flexibility, greater choice in what’s right for them, and have helped build a solid foundation for future economic growth, for more jobs and higher living standards for Canadians.
As I have said, when our budget is balanced, our priority will be to provide tax relief for hard-working Canadian families.
Let me talk for a moment about what I have spent almost three years thinking about, promoting and defending, our rich natural resources. This audience knows well the importance of the resource sector to the Canadian economy—it is 18% of our GDP, creates directly and indirectly 1.8 million jobs, accounts for over half our exports and generates $30 billion for governments.
The oil sands are among the world’s largest technology projects, contributing about 275,000 jobs across Canada and $48 billion in GDP—numbers that could grow to an average of 630,000 jobs and a contribution of $113 billion in GDP each year up to 2035.
That’s why we are very disappointed with the US Administration’s decision to delay yet again the decision on Keystone XL, perhaps the most studied natural resource project in the history of the world. Keystone can create thousands of jobs on both sides of the border, billions in economic activity and revenue to governments to support critical social programs like health care, housing and education. It would enhance North American energy security by displacing Venezuelan oil with Canadian crude with the same carbon emissions, a reliable supplier who honours its contracts and will not threaten to cut off supply.
Independent comprehensive scientific reviews by both the Canadian Energy Board and the US State Department vetted the project. Furthermore, a strong majority of Americans support it, as do most Senators and Congressmen and all the Governors through whose states the pipeline would travel.
Nevertheless, a powerful and well-funded group of Americans have targeted Keystone as part of an anti-oil sands, anti-fossil fuels campaign. On merit, they have picked the wrong target. The oil sands represent a minuscule part of global greenhouse gas emissions, only 1/1000th. In contrast, coal fired electricity in the US emits 30 times the emissions. Furthermore, the US is undertaking a massive development of shale gas and tight oil which is enhancing its competitiveness, growing its economy and changing the geopolitics of the global energy market.
I want you to know our Government will never give up on Alberta nor will we ever give up on Canadian jobs. We will continue to advocate for Keystone until it is approved, as we will advance other environmentally responsible projects in the national interest.
Speaking of jobs, our Government is focused on training the workforce for tomorrow. Students participating in Canada’s education system are the largest source of new labour market supply, and providing them with the right skills is essential to further Canada’s economic prospects.
Employers and various organizations have identified an acute need for skilled tradespeople. Employer surveys indicate that skilled trades are among the most difficult jobs to fill. This certainly has been the case here, as unfilled demand for skilled labour has been most acute in Alberta and Saskatchewan.
As the baby boom generation retires, demand for skilled tradespeople and apprentices in particular will inevitably increase, but apprentices can face significant costs including educational fees, tools and equipment, living expenses and forgone wages. That is why our Economic Action Plan will create the Canada Apprentice Loan to provide apprentices registered in their first Red Seal trade with access to interest-free loans of up to $4,000 per period of technical training.
While Canada boasts high levels of post-secondary achievement, the transition to the first job can of course be challenging, and that’s why we are dedicating $40 million towards supporting up to 3,000 internships in high-demand jobs.
Perhaps more significantly, our Government is introducing the Canada Job Grant, which could provide up to $15,000 per person for training costs including tuition and training materials. It includes up to $10,000 in federal contributions, with employers contributing on average one third of the total cost of training.
By investing in the skills of Canadians and the resources of our country, we are acting to ensure Canada’s long-term prosperity.
Let me conclude by discussing something that complements responsible resource management, and that is responsible fiscal management. I want to discuss our commitment to balanced budgets. This is the cornerstone of our Economic Action Plan and it will ensure Canada’s prosperity, create job opportunities for Canadians and raise our standard of living.
Budgets do not balance themselves. That requires a fiscal plan and discipline. Our plan to return to balanced budgets is not, however, an end in itself. Balancing the budget and reducing debt will provide a host of benefits that go well beyond the black ink on the bottom line.
- It will free up taxpayer dollars that might otherwise be spent on interest costs.
- It will keep interest rates low.
- It will strengthen our country’s ability to respond to longer-term challenges such as population aging and unexpected global economic shocks.
- It will help ensure intergenerational fairness by not saddling our children and our grandchildren with our debts.
In this rapidly changing world, helping individual Canadians and Canadian businesses is at the core of what this Government does. It is why, despite ongoing global economic challenges, Canadians can count on our Government to protect their interests.
Ultimately, it is the ingenuity, the entrepreneurship and the hard work of individual Canadians that generate economic growth and a quality of life in their communities right across the country. You are the reason, wherever I go, I hear how admired and envied Canada is. Government is there to provide the environment for your success, to protect your interests and then get out of the way.
Thank you for listening and for contributing to the greatness of Canada.