If Canada needs to weather another recession, it can.
That was what Finance Minister Bill Morneau told the West Block‘s Mercedes Stephenson when pressed about whether the government has an end in sight for the deficit. There have been warnings coming from economists over the last year that a recession could hit within the next 18 to 24 months and pose a challenge to federal policymakers with a deficit still on the books.
Morneau defended the current federal debt-to-GDP ratio of 30.4 per cent after a week that saw the Toronto Stock Exchange post its largest fall in three years.
“The Canadian government is carrying the lowest amount of debt to those comparable economies so that puts us in a position where should we find ourselves for whatever reason to need to demonstrate that resilience, we have the capacity,” he said when asked if Canada can handle a recession.
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Earlier in the week, North American markets fell sharply, led in Canada by cannabis stocks correcting after pre-legalization highs.
The Bank of Canada also announced last week it was raising its trend-setting interest rate to 1.75 per cent.
Rates haven’t been above 1.5 per cent since before December 2008.
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And while the Bank lowered its prediction for how much foreign investment in Canada will drop by 2020, there have been repeated warnings over the last year from big banks and economists that a recession sparked by investor hesitation and potential cooling in hot Canadian housing markets could land hard.
Morneau acknowledged concerns among investors, particularly those in the oil and gas sector and in light of corporate tax cuts south of the border.
He said he plans to specifically address the issue of business concerns in the fall economic update next month.
“They’re concerned to make sure they can invest on a competitive basis, especially for businesses that have an opportunity to invest in Canada and the United States. So we’re looking at the tax changes that the Americans have made in order to make sure those businesses with that choice, that they choose Canada,” said Morneau.
“We want to make sure investment continues in Canada and that’s exactly why I’ve been out listening to businesses and that’s exactly why I’ve said what we want to do in the fall economic statement is address that business anxiety.”
Scheduled for Nov. 21, the fall economic update is a chance for the government to take stock of the country’s books and present what is essentially their version of a report card about how they think they are doing.
In recent years, they have also been a chance for the government to try to hit the reset button amid the feisty fall political season.
Last year, for example, Morneau used the update to tout the government’s focus on the middle class while he himself had been facing ethical questions over his stake in the family business and for failing to disclose he owns a villa in France through a holding company under his control.
In the midst of questions over a sluggish global economy in 2016, Morneau used the update to focus on domestic infrastructure spending and how to lure foreign investment into Canada.
This year, the update will come in the midst of continued questions over how the government, which purchased the Trans Mountain pipeline earlier this year, plans to follow through and get it built to ensure Canadian oil can reach foreign markets.
—Watch an extended interview with Finance Minister Bill Morneau below.