Morneau Says Responsible Deficits Will Aid Weak Canada EconomyGreg Quinn, Pamela Ritchie and Josh Wingrove
Infrastructure spending to be focus of first fiscal update
Rookie finance minister will also track housing closely
The first fiscal update from Canada’s new government will be delivered soon with plans to press ahead with stimulus spending in a weak economy that’s already pushing the budget into deficit, according to Finance Minister Bill Morneau.
The plan will focus on transportation, fighting climate change and adding new housing units, Morneau said in a Bloomberg Television interview Monday from Antalya, Turkey, where he’s attending a summit of Group of 20 nations with Prime Minister Justin Trudeau. The rookie lawmaker said the update will incorporate signs of weakness including a budget-officer report projecting C$12.7 billion ($9.5 billion) of deficits over three years even before the Liberal Party’s plan for C$25 billion of deficits.
“It’s important for us to move forward on our campaign commitments in a responsible way,” Morneau said. “The campaign commitment around infrastructure spending was a very important part of our commitment, and we will be moving forward on that commitment in a fashion that will ensure that we find the right projects to make a real difference for the Canadian economy.”
The world’s 11th largest economy shrank in the first half of the year as crude oil prices dropped below $50 a barrel and manufacturers struggled to rebuild U.S. orders even with the aid of a falling currency. The Parliamentary Budget Officer cut its 2015 growth forecast to 1.1 percent on Nov. 10 from 2.1 percent, and Morneau declined to comment on whether he can still meet a pledge for a balanced budget in 2019.
The finance minister called the government’s weaker finances an “inheritance” from the Conservatives, led by Stephen Harper, who ruled for a decade until the Oct. 19 election, adding the Liberals were clear in the campaign the economy was getting weaker.
“That really was why we built our platform with an expectation of the need to invest, and specifically to invest in infrastructure, seeing that that would create some fiscal stimulus and help to change our economic situation from the one we find ourselves in now,” he said.
Morneau won his Toronto-area district and stepped down from Morneau Shepell Inc., a pension-consulting firm started by his father. He holds a bachelor’s degree from the University of Western Ontario and a master’s from the London School of Economics. He beat out a host of long-serving Liberal lawmakers for the finance portfolio, which typically goes to a political veteran.
Besides budget plans, Morneau said one of the first briefings he sought was on the real-estate market. Canada’s central bank and housing agency have both said there are signs of modest over-valuation of housing prices, especially in Toronto and Vancouver. The Organization for Economic Cooperation and Development said last week tighter regulations are needed to curb a market that’s been fed by record household debt in a period of low interest rates.
“There is significant differences across the country, in terms of our housing markets, and that’s something that we will pay close attention to,” Morneau said.
Infrastructure dominated the interview, and the new minister said it may include projects beyond the traditional roads and bridges to things that could curb emissions -- a shift from past finance ministers, who tended to leave that file to their colleagues. “It’s a number of things we want to do both to adapt to climate change and put ourselves in a position where we’re more environmentally focused,” he said.
Morneau also backed the International Monetary Fund’s move toward adding China’s yuan to its list of reserve currencies. “We’ll need to go back and discuss that, but we have been of the view that that’s probably a direction that makes sense.”