PM’s good news to Wall Street: Canada closer to surplus than thought
Harper challenged on some claims at New York event, specifically on job growth and trade deals.
NEW YORK — There’s positive fiscal news coming soon from the federal government, Prime Minister Stephen Harper revealed during a public event in the US.
The prime minister announced before a business audience Sept. 24 that last year’s deficit numbers will have to be revised, for the better.
He made the statement during a PowerPoint presentation at New York’s Goldman Sachs investment bank, where he touted the performance of the Canadian economy.
“It says $16.6 billion,” Harper said, of the deficit number for 2013-14, posted on the screen.
“That number will be somewhat… significantly… lower. Although we expect a very small deficit this year (in 2014-15), we will be very close (to surplus)… We’re anticipating healthy surpluses.”
That puts the government in a position to enter an election next year with fiscal room, to lower taxes or spend on campaign promises.
Opposition parties have accused the government of downplaying this year’s finances, to suddenly announce a surplus in an election year.
The prime minister presented other slides showing Canada outperfroming other countries in a variety of areas, including federal debt-to-GDP ratio, new free-trade deals, and job growth.
But the moderator of the session challenged him on some of the claims. The Wall Street Journal’s editor-in-chief told Harper he was using very favourable methodology to build his claim of higher job growth than the US.
Gerard Baker said using 2006 as his baseline obscured the fact that more recently, as it emerges from its post-2008 mess, the US has actually done better than Canada at creating jobs.
“You haven’t really outperformed the US since then,” Baker said.
He also warned that Canada’s economy is not being driven by external demand, but domestic consumption and increased debt. He also said that outside of the energy industry, Canada’s economy was less successful, and he mentioned manufacturing in particular.
Harper contested Baker’s interpretation of the baseline year for job-growth claims but, after a brief exchange, conceded: “It’s flattened recently.”
Harper also sought to reassure American markets about Canada’s housing market. There’s been speculation, in the US as well, that the Canadian market might be due for a correction after having remained immune to the US’s 2007-09 crash.
But Harper was adamant: “Don’t anticipate a housing crisis in Canada. It’s not going to happen.”
He said a rise in interest rates might hurt a small number of homeowners who over-extended themselves with debt in an era of low interest rates, particularly before Canada tightened some of its mortgage-lending standards under the late finance minister Jim Flaherty. But he noted that any increase in interest rates would also come at a time of robust economic growth, easing some of the pressure on indebted households.
There was also an exchange about American tax policy.
Harper took a veiled swipe at the US political system, which has talked for years about reforming the American tax code but can’t get any agreement in Congress about how to achieve that.
“Business activity moving to where tax rates _ and where economic environments – are more competitive, is just the law of economics,” Harper replied, when asked about the latest news on inversions. “Good governments structure themselves in a way that they receive that capital flow, rather than lose it.”
© 2014 The Canadian Press