24 April 2008

Flaherty sees a silver economic lining

The following is excerpted from the 24 April 2008 edition of “Toronto Star”.

Finance Minister Jim Flaherty acknowledged yesterday that Canada's economy may perform worse this year than he forecast, but said the country would still record "positive" growth this year.

Flaherty, who was in New York to promote Canada on Wall Street, was asked about his own economic outlook in light of the increasingly gloomy forecast from the Bank of Canada, which on Tuesday scaled back its prediction for 2008 growth to an anemic 1.4 per cent.

"I'm still satisfied that we have positive economic growth and will have positive economic growth in Canada this year," he told reporters.

But he wouldn't give a specific prediction, saying only that he was sure Canada would steer well clear of a recession. (A recession is usually defined as six months of zero or negative economic expansion.)

In his February budget, Flaherty relied on estimates by private sector economists to provide a 2008 growth estimate of 1.7 per cent. Yesterday he noted that, since then, some growth predictions have declined.

Nonetheless, he said, Canada's economy will be "okay" despite the negative impact of the near-recessionary conditions in the U.S.

He said the federal Conservatives will avoid a budget deficit even if it means reducing federal spending or slowing the pace of repayment of the federal debt….

…Asked about fresh predictions showing Ontario with only marginal growth, Flaherty said, "I want all regions of Canada to do well.

"Ontario and Quebec in particular have challenges with respect to the manufacturing sector, particularly the auto sector in Ontario, also in forestry."

He said these problems have been evident for many months "and that's why I am gently prodding Premier (Dalton) McGuinty in my own subtle way to reduce business taxes."

Flaherty has prompted widespread consternation for months with his persistent attacks on McGuinty's economic policies, a tactic that pollsters say has not helped the federal Conservatives with Ontario voters.

In a lunchtime speech to a business group here, the finance minister praised the governments of Alberta, British Columbia, Manitoba and New Brunswick for taking steps to cut business taxes.

Asked later if he was leaving Ontario out of his sales pitch to U.S. investors, Flaherty told the media he's promoting all of Canada….

…He told the business audience that the U.S. downturn is hurting Canada's exporters, but said, overall, the Canadian economy is well-placed to ride out the economic storm from south of the border.

Beginning with a meeting on Monday with the CEOs of Canada's big banks, he wants to systematically upgrade requirements for disclosure by financial institutions to avoid a situation where investors are buying exotic securities without knowing the full risks.

The reforms are part of a program agreed to by Canada and other G-7 nations in response to the global credit crisis spawned by the U.S. subprime mortgage meltdown.

Echoing Prime Minister Stephen Harper, Flaherty said Canada thinks NAFTA "is working well," but he added that because of Canada's exports of oil to the United States, Ottawa would be in a very strong bargaining position if it were forced to enter renegotiations on the trade pact…