Calm and caution were the key messages delivered by Mark Carney and Jim Flaherty to Parliament in response to the recent turmoil in world markets.
To combat swirling rumours of a looming recession, the two men together addressed Parliament. Neither man expects to see a global contraction.
In terms of financial stimulus as well, both men are employing a “wait and see” approach, although they are not ruling out intervention altogether. Most economists have predicted a 35% chance that there will be a recession.
Carney said,” Recent events serve as a reminder that in a world awash with debt, repairing the balance sheets of banks, households and countries will take years. As a consequence, the pace, pattern and variability of global economic growth is changing, and Canada must adapt.”
“In short, the considerable external headwinds that the Bank has long identified are now blowing harder. For Canadian producers, the persistent strength of the Canadian dollar is compounding the sluggishness of U.S. demand. Largely reflecting such external factors, recent Canadian data has been consistent with minimal to slightly negative growth in the second quarter. At the same time, labour market developments and business investment intentions suggest continued strength in our domestic economy.”
“The Bank continues to expect that growth will accelerate in the second half of the year, led by business investment and household expenditures.”
He expects to see economic growth resume in the second half of this year.
Flaherty too, is confident in the relative strength of Canada’s economy. “Canada is the only G-7 country to have regained all the output and jobs lost in the global recession. Canada’s net debt burden is markedly lower than that in most other major industrialized countries, and our fiscal fundamentals are sound and sustainable over the long term,” Minister Flaherty said.
“We have a low-tax plan for jobs and growth and the resolve to stay the course. The Next Phase of Canada’s Economic Action Plan will preserve this country’s advantage in the global economy; strengthen the financial security of Canadian workers, seniors and families; and provide the stability necessary to secure our recovery in an uncertain world.”
Flaherty still contends that the plan to return to balance by 2014-2015 is on track. Flaherty insists too, that part of economic stability is staying strong during troubling times: ““In a very uncertain global economic situation, one of the best strategic contributions that the Government can make to bolster confidence and growth in Canada is to maintain our strong fiscal position.”