Wednesday, February 2, 2011

Flaherty sees little hope for jobless in 2011

Les Whittington | Wed Feb 2 2011

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OTTAWA—A slower-growing economy is offering little hope to Canada’s 1.4 million unemployed, economists told Finance Minister Jim Flaherty in talks in advance of the March budget.

Unemployment, now standing at 7.6 per cent, will average a slightly higher 7.7-per cent through 2011, according to the average forecast of the dozen economists who met with Flaherty.

Speaking with reporters afterwards, Flaherty said the analysts “anticipate resistance to the unemployment rate coming down.

“This is true also in the United States. A lot of employers have been hesitant to rehire because of their perception of risk in the economy,” he said.

The weak projection for unemployment reflected a more pessimistic view of economic growth in 2011. The economy will expand by only 2.4 per cent this year, a bit weaker than the 2.5 per cent predicted by economists in a September survey.

That compares with growth of nearly 3 per cent last year.

Flaherty said the government, facing a $45-billion budget shortfall in the current fiscal year, is steering clear of any fresh, costly initiatives in its next economic plan.

“Are there billions of dollars of extra money available for big new spending programs? No, and there will be no big new spending programs in this budget.”

He confirmed the budget will be delivered to Parliament in March but declined to say which day.

In the upcoming budget, the government is switching from a period of massive stimulus spending — $46 billion over two years — to concentrate more on fiscal restraint with an eye toward balancing the budget by 2015.

“I can tell you that our goal is to maintain the fiscal track. We’re not far off the fiscal track,” Flaherty told reporters.

The minority Conservative regime is facing the possibility of defeat—and the need to send Canadians to the polls—over its budget.

The government needs one of the federal opposition parties in Parliament to support the March budget or the Conservative regime will fall.

One of the flashpoints with other parties may be Prime Minister Stephen Harper’s decision to go ahead with another round of corporate income tax cuts—worth $6 billion—despite the huge federal budget deficit.

Flaherty has said the government has no intention of backing down on corporate tax reductions. But he said Tuesday there might be room for the Conservatives and the NDP to work together on the issue of additional help for low-income seniors.

“We do have, regrettably, particularly some single older Canadians who are not entitled to the Canadian Pension Plan because in their day they worked at home raising children and did not work outside the home, who have some income issues,” Flaherty remarked.

“And that’s something that, you know, all Canadians I’m sure would like us to address,” he added.

NDP finance critic Thomas Mulcair said he’d be happy to discuss pension issues with Flaherty. But whether the government would be willing to put enough money into overall improvements in pensions to satisfy the NDP is unclear. Layton is calling for the government to expand the Canada Pension Plan, something Flaherty says he is not in a position to do now.

“Our priority continues to be economic recovery,” Flaherty said after the meeting. “The economic recovery remains fragile. Our view is that we must remain focused on creating jobs and economic growth while balancing the budget in the medium term, which is what we intend to do.”

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