11 September 2009

 

 

 

Ottawa's finances are in much worse shape than previously forecast and the Conservatives no longer have any idea when they can balance the books.

 

Finance Minister Jim Flaherty yesterday warned Canadians of painful spending restraints to deal with up to 10 years of deficits.

 

The issue promises to dog Prime Minister Stephen Harper in an election campaign that appears inevitable.

 

Yesterday's update also scrapped an earlier prediction that Ottawa would stop running up debt by 2013-14.

 

The government will still be saddled with a deficit that year and in 2014-15 – part of revenue shortfalls totalling more than $164 billion over the next five years.

 

A government official briefing reporters in Ottawa said it's impossible to predict when the federal accounts can be balanced. It may take five to 10 years to put an end to budget deficits, the official said….

 

Rejecting higher taxes or cuts in federal cash support for the provinces, Flaherty said the government would clean up its books by restraining the growth in federal program spending over several years. That spending, now $241 billion a year, has been growing on average at a rapid 7 per cent annual rate since Harper took office….

 

Flaherty said the economy is improving but the recovery is fragile. He predicted economic growth of minus 2.3 per cent this year, much worse than the minus 0.8 per cent forecast in the January budget.

 

But the economy will bounce back and expand by 2.3 per cent next year, he predicted.

 

Unemployment will continue to rise and hit 9 per cent next year, up from the 7.7 per cent predicted in the January budget, the government said.