Canadian Prime Minister Stephen Harper won a majority of seats in Parliament for the first time, giving him a mandate to fund corporate and personal income tax cuts with curbs on spending.
Harper’s Conservatives were ahead or leading in 166 districts, according to preliminary results from Elections Canada. Jack Layton’s New Democratic Party was leading in 103 seats and will form the official opposition for the first time, followed by 34 for the Liberal Party led by Michael Ignatieff. The separatist Bloc Quebecois led in four seats with the Green Party ahead in one. The Conservatives held 143 seats in the 308-seat legislature before the vote was called in March.
The victory in the national election yesterday ends seven years of minority governments that have fueled government spending, and may make it easier for Harper to open up industries to foreign investment. Throughout the campaign, Harper said he needed a majority to secure the country’s economic recovery.
“Finally, we are getting majority government,” said Hosen Marjaee, senior managing director at Manulife Asset Management in Toronto, which oversees about C$16 billion ($16.9 billion) in fixed-income assets. “We have a government for four or five years and stability,” he said. “It will be good as far as the corporate environment is concerned.”
Harper, 52, has governed since 2006 with a minority of seats, meaning he’s had to rely on support from opposition lawmakers to pass laws.
The Canadian dollar rose 0.6 percent to 94.61 cents versus the U.S. dollar at 1 a.m. in Toronto, from 95.17 cents yesterday. It had fallen against all Group of Seven currencies over the past month except the U.S. dollar, as support for the pro-labor NDP surged and raised concern the party may end up with a share of power, or create gridlock for a Conservative minority government.
Dean Popplewell, an analyst in Toronto at the online currency-trading firm Oanda Corp, says the currency could gain at least one cent against its U.S. namesake today.
“If they are in control of the rudder,” the Canadian currency “is going to take off,” Popplewell said of the Conservatives.
Flaherty, Clement Win
Harper was set for re-election in his district, as were Finance Minister Jim Flaherty and Industry Minister Tony Clement. Foreign Minister Lawrence Cannon was likely defeated, CTV said. Liberal Leader Ignatieff and Bloc Quebecois leader Gilles Duceppe were trailing in their districts according to Elections Canada’s partial results.
Harper’s victory, along with his party’s control of the Senate, puts the Conservatives in firm control of the federal agenda for the first time since the early 1990s, when the party’s predecessor -- the Progressive Conservatives -- held majorities in both chambers of Parliament.
Harper has chosen a more incremental approach even as he faces daunting challenges: a weakening U.S. economy and strengthening dollar that threatens exporters, an aging workforce that will put pressure on government finances and slow growth, and emerging disparities between energy-rich provinces such as Alberta and manufacturing-heavy eastern regions such as Ontario.
Government program spending has increased 59 percent since 2004 and the Bank of Canada has reduced its estimate of potential output by about one percentage point to 2 percent over that time.
Harper’s first five years in power were marked by reductions in the federal sales tax that were widely panned by economists, and aggressive reductions in corporate income taxes that rival parties like the Liberals and NDP had pledged to reverse. Canada cut the federal corporate income tax rate by 1.5 percentage points to 16.5 percent on Jan. 1, and it will fall to 15 percent in 2012 under legislation passed in 2007.
Royal Bank of Canada, Bank of Nova Scotia, Suncor Energy Inc. and Barrick Gold Corp. -- which reported paying a combined C$6.4 billion income taxes over the past 12 months according to data compiled by Bloomberg -- may be among the biggest beneficiaries of the reductions.
Canada’s benchmark S&P/Toronto Stock Exchange Composite Index has fallen 1.4 percent over the past month, while Canadian government bonds have underperformed debt of Group of Seven nations.
“The fact that he will pass the tax cuts for corporations, that’s something investors appreciate,” Charles St-Arnaud, Canadian economist and foreign exchange strategist at Nomura Securities International in New York, said in a telephone interview.
Among Harper’s first tasks will be to pass the 2011 fiscal plan, which didn’t pass Parliament before elections were called. During the campaign, Harper pledged a review of government operations to find C$4 billion in annual savings that he promised will be used to balance the budget by 2014, help to fund already legislated corporate tax cuts and finance C$6.6 billion in new election pledges that include a tax cut for families.