On November 12, 2013 speaking in Edmonton, Canada’s Minister of Finance, Jim Flaherty, provided some details around the Canadian economy and some outlooks for the future.
Canadian Job Market
Currently, Canada has had the best job creation of all the G8 economies over the past 10 years. Young people are experiencing a larger job market and Mr. Flaherty would like to continue to focus on job creation.
Canadian Real Estate
Mr. Flaherty does not want a housing bubble to occur in Canada. He is quoted as saying “If you lose your financial footing, people will get hurt”. In 2012, Mr. Flaherty discouraged a housing market bubble by issuing a round of restrictions to curb mortgage lending. Although a housing bubble is not imminent, he will intervene again in order to avoid this situation.
Canadian Infrastructure and Development
Mr. Flaherty is a strong supporter of all pipelines. He believes the West to East pipeline is the most obvious choice to boost the Canadian economy and benefit the country in the future. The West to East pipeline would allow Alberta to increase production and flow more oil to Eastern Canada. Mr. Flaherty believes this long term decision is an obvious choice as it includes a deep water port that is ice free, the refineries are already in place and the right of way is defined. This pipeline would not only create additional jobs but also increase Canadian oil prices.
Mr. Flaherty also is a strong supporter of infrastructure development and has extended the Canada Fund by 8 years and $70 billion. P3’s, which involve the development of public services and infrastructure through private as well as public funding, will have an expanded role in developing Canadian infrastructure. This has proven to be successful in the past, especially in transportation and hospitals.
Currency and Debt
The Canadian dollar has been strong for a few years. The strength of the dollar is partly due to confidence in the country’s economy. Increases in the Canadian dollar against the US dollar can make it difficult for exporters, whom are already suffering from a slower global market due to the European banking crisis. Mr. Flaherty has announced that there are no plans to intervene unless the Canadian dollar exceeds $1.10.
Mr. Flaherty has been actively committed to reducing the deficit. Currently, the government debt servicing is now only $0.11 of every dollar versus the peak of $0.30 per dollar.
Although there is still a budget deficit, this is anticipated to end in 2014-2015 where, for the first time in seven years, the Canadian budget is anticipated to emerge with a surplus. Mr. Flaherty is still committed to increasing the tax free savings accounts limits, increase family income splitting and increase the health tax credits once a surplus is achieved.
Mr. Flaherty has expressed some concern that we still have not seen the bottom of the European banking crisis. The danger of the European banking crisis is that it directly affects the US GDP which affects the Canadian economy.
Despite Europe’s struggles, Canada has moved forward with an EU pact which would give Canadian companies access to 50% of the world’s GDP. Canada is already part of NAFTA, giving us access to the large US economy, and with the addition of the EU pact, Canada will be the first country with access to both agreements. This would make it easier for Canadian companies to invest and export to EU members. Europe has the largest consumer population with 500 million consumers. This would increase the export of many Canadian products including Canadian meats. This will also allow Canada to be less reliant on the US.
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Thanks to Jane Alm of the Angus Watt Advisory Group at National Bank Financial and Sophie Duncan of KWB Chartered Accountants for providing much of this content