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Canada PM Promotes Gov’t Spending to Boost Economy

Canada PM Promotes Gov’t Spending to Boost EconomyCanada PM Promotes Gov’t Spending to Boost Economy

Canadian Prime Minister Justin Trudeau is talking up the need for more federal spending to help the economy—even as experts warn his government of an ever-gloomier outlook.

Speaking in Toronto to mark his 100th day in office, Trudeau said it’s more important than ever for the Liberal government to spend on growth-generating projects, such as the party’s promised infrastructure plan, Yahoo reported.

The prime minister made the comments shortly after a group of private-sector economists shared their latest economic forecasts with Finance Minister Bill Morneau at a meeting just across town.

For decades, federal finance ministers have used an average of private-sector economic forecasts as the foundation of their fiscal plans.

The projections can have significant impacts on just how much wiggle room is available for governments to spend.

That fiscal flexibility is poised to be considerably tighter than it was in the fall, the last time the group was convened.

For example, Conference Board of Canada chief economist Glen Hodgson said he gave Morneau a 2016 growth forecast Friday of just 1.7%—one of the most optimistic predictions in the room.

But Trudeau said a struggling economy provides an even stronger argument in favor of the Liberal government’s job-creation plan: running deficits in the coming years in order to spend billions on stimulus like infrastructure projects.

Many experts, including Hodgson, say infrastructure investment is one of the best ways to stimulate an economy.

Trudeau also highlighted the other Liberal measures he said will help the economy, such as boosting child-benefit payments and providing some income-tax relief for middle earners while hiking rates for top earners.

The government has been emphasizing its other, more flexible “fiscal anchor,” which is to continue lowering Canada’s debt-to-GDP ratio during its mandate.

Morneau is facing fiscal pressure as he prepares his first budget, expected late next month. His department last consulted private-sector economists ahead of the November fiscal update.

At the time, the average 2016 projections for Canada’s real GDP was 2% and US$54 per barrel of oil, which has a big impact on Ottawa’s bottom line.

Financialtribune.com