Canadian Finance Minister Jim Flaherty said he’s aiming to balance the country’s budget as planned by 2015 through additional spending cuts, even as the government’s revenue outlook weakens.
“We are on track to balance the budget in the current parliament, which means 2015,” Flaherty said in a speech today in Ottawa marking his seventh year as finance chief, adding he is prepared to be flexible if the global economy deteriorates.
Flaherty said in November he planned to balance the budget in 2015 by clamping down on spending, even as he pared revenue projections by C$36 billion ($36 billion) over five years. Flaherty hasn’t set a date for this year’s budget.
Canada’s revenue outlook has deteriorated further since November on signs the economy has slowed, making it more difficult to bring the budget into balance, a person with direct knowledge of budget planning said last month. Canada is the only Group of Seven country with a stable AAA debt rating.
“In uncertain global economic times, the most important contribution a government can make to bolster confidence and growth is to maintain a sound fiscal position,” Flaherty said.
Canadian government bond yields declined today, with the 10-year security falling to 1.98 percent from 2.02 percent. The price of the 2.75 percent coupon bond due in June 2022 rose 23 Canadian cents to C$106.46 at 3:15 p.m.
Growth in nominal GDP, which includes price changes and is a more accurate reflection of the government’s tax base, “is weaker than we would like,” Flaherty told reporters after the speech. “We have to do more on the controlling our own spending side.”
Flaherty said he is concerned by the gap between the price of Canadian crude and other world oil prices, which is having an impact on the government’s finances. The price of Western Canada Select, a blend of oil-sands bitumen produced in Alberta, is trading at about $28.50 below U.S. benchmark West Texas Intermediate oil.
“We are prepared to be flexible and pragmatic should circumstances warrant,” said Flaherty. We “will remain focused on the things that we can control.”
That includes ruling out “risky” spending programs, adding to infrastructure spending only if the fiscal situation allows and “eliminating wasteful or ineffective spending,” he said. The government won’t impose new taxes, he said.
The next budget will also focus on ways to boost research and development and worker skill development, Flaherty said.
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