21 December 2007

Economic challenges loom, PM warns

The following is excerpted from the 21 December 2007 edition of “globeandmail.com”.

Prime Minister Stephen Harper is warning Canadians to brace themselves for a possible economic slowdown next year that will restrict government spending and limit tax cuts.

Speaking in a year-end interview with The Globe and Mail, the Prime Minister dampened any expectations of big spending on the horizon as he and the cabinet hammer out the spring budget.

"Although the fundamentals of the Canadian economy are strong, although we have taken our budget actions very early this year to position ourselves, the fact of the matter is Canada — as an open trading economy — cannot be immune from the growing uncertainty we see in the U.S. economy and the global economy," he said. "… There's likely to be a more challenging economic year ahead."

Mr. Harper said the government will have to be prudent in its spending plans.

"We don't know yet, but what I can tell you is that the government will not be undertaking any radical fiscal action. Don't expect billions and billions of new expenditures or billions and billions of dollars in new tax reductions. We will be taking a very status quo, pay-down-the-debt kind of orientation going forward."

He said he expects only a couple of exceptions to the stay-the-course approach.

The government announced a series of tax cuts in 2007 that included reducing the GST to 5 per cent and a new child benefit. It also provided substantial cash for provincial transfers.

In another warning, Mr. Harper said Canadians should prepare for tough environmental measures in the new year on reducing greenhouse-gas emissions under the Kyoto accord.

Ottawa has promised regulations in the spring that will force industry to reduce the intensity of its greenhouse-gas emissions by 18 per cent from 2006 levels by 2010.

It will also publish regulations forcing significant reductions of air-polluting substances such as nitrogen oxides and sulphur oxides.

"This year, as we approach the 2010 targets, we will be actually implementing those regulations," he said. "Mandating mandatory reductions imposes costs. Those costs are real in the short term. There is no way to avoid them. None."

Mr. Harper said the price to industry will be manageable, but he expects provinces and corporations to complain, even if the measures lead to technological opportunities.

The Prime Minister also defended his government's position at the recent Bali climate change talks that all major emitting countries must sign on to a new greenhouse gas reduction deal.

"What I have trouble grasping is how you can have the kind of thing you had at Bali where everybody gets up and beats their chest and says it's a looming disaster and then virtually none of them are willing to actually endorse the principles that would lead to an effective international protocol.”…

Despite his notes of caution, he said the country enters 2008 on a solid footing.
"The economy is strong," he said. "It is arguably its strongest in about three decades."…

In its budget, the government introduced a revamped equalization program that provided more cash for recipient provinces….