Canada's government will cut spending despite slow growth, senior official says

13:37, September 17, 2010      

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The Canadian government won't reconsider its decision to end stimulus spending on infrastructure, which will stop at the end of this fiscal year, Government House leader John Baird told a news conference Thursday.

Baird, who is responsible for ensuring the Conservative government's legislation is passed by the House of Commons, said the government will stick to its program of fighting deficits. Prime Minister Stephen Harper pushed a deficit-cutting agenda at the G-20 and G-8 meetings held in Canada in June, and the government will stick to that policy, Baird said.

"The Prime Minister showed great leadership at the G-8 and the G-20 with seeking a plan to halve the deficits by 2013 and to eliminate them thereafter," Baird said. "I think the Prime Minister has indicated that we'll beat both of those and provide leadership... we believe in balanced budgets."

"I'll say if you look at our government's track record, I think we're the most fiscally conservative, fiscally responsible government in the western world. Our deficits are smaller by a large margin than most others as a percentage of GDP. We've got a good plan that the Minister of Finance laid out to get there. We'll halve it by next year from what it has been," he said.

Economists at Toronto-Dominion Bank released a forecast Thursday that said the Canadian economy is being dragged down by sluggish growth in the U.S. and noted the benefits of Ottawa's 12-billion-Canadian-dollar (about 12 billion U.S. dollars) stimulus program are already wearing off. The bank has also detected new signs of weakness in Canada's housing market.

In its statement, the bank's economists warn that Canadian households are slipping further into debt, does face significant headwinds, among them a weaker outlook in the U.S., a downswing in Canadian housing, an increasingly indebted Canadian consumer, and the waning of benefits from past monetary and fiscal stimulus measures.

The TD economists predict 3 percent growth this year, with just a 2 percent increase in gross domestic product (GDP) next year and 2.8 percent growth in 2012. Canada's national and provincial governments are in relatively good financial shape, the bank noted.

Baird said the government will focus this fall on three policy areas: job creation, security from crime and illegal immigration, and improving "prosperity for families and communities," which, he said, will come from tax cuts and government fiscal restraint.

John McCallum, a senior critic of the opposition Liberal Party, which is tied in public opinion polls with the governing conservatives, said Thursday his party will fight any further cuts to the corporate tax rates. These are scheduled to drop from the present 18 percent level to 15 percent by 2012.

Baird, however, said, "we know that higher taxes will weigh down and hold back Canadian families and businesses and kill jobs. We will keep taxes low and continue to improve the quality of life for Canadian families."

Along with spending cuts and tax reductions, Baird pledged the Conservatives will continue to bring in "tough on crime" legislation, including measures to stop the flow of illegal immigrants into Canada.

It will also defend the plan to spend 16 billion Canadian dollars (16 billion U.S. dollars) on the F-35 interceptor fighter, which is being criticized by opposition politicians for being too expensive and unnecessary for Canada's defense need.

He said the prime minister and senior ministers will tour the country over the next few months to ask Canadians for their views on the economy and the government's policies.

The government will bring down a budget update this fall, Baird added.



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