Today Canadian Transport Minister John Baird, whose responsibilities include federal infrastructure, announced a planned $7 billion in infrastructure spending over the next two years, with emphasis on job-rich public works projects that can be started this year.
The $7-billion in new infrastructure funding also includes a $2-billion fund to support repairs and maintenance and accelerated construction at colleges and universities across Canada, and a $1-billion Green Infrastructure Fund.
The past week has seen an unprecedented series of budget previews, beginning last week when Harper's office indicated the country will run deficits totalling $64-billion over two years. And yesterday the Human Resources Minister Diane Finley announced that the budget will include $1.5-billion in training funds for laid-off workers.
In the wake of a coalition threat to topple the minority Conservative party last November, efforts at openness have taken place within the federal government. Individual provinces have put forward hundreds of ideas over the past few months for how to spend the multibillions the government plans to make available for roads, bridges, water-treatment plants, broadband initiatives and the like. The premiers also met with the Prime Minister and made suggestions on how to reform Employment Insurance and spend money on retraining.
It was a far cry from last year when Mr. Flaherty advised international investors that Ontario was one of the worst places in the world to invest.
But whether the Prime Minister can rebuild trust quickly is still a question. The government reconvenes today and the budget is presented tomorrow. Liberal leader Michael Ignatieff has said he will meet with his advisors after learning the contents of the budget and make a decision whether to support it or not within 24 hours.
Excerpts from an article in the Globe and Mail:
Looking through the blizzard of economic statistics, one stands above all else as a reliable barometer of where the Canadian economy is headed.
And it isn't even Canadian - it's U.S. housing starts.
When a backhoe digs into the ground in Phoenix or Peoria, starting work on a new home, it sets off a chain reaction of purchases that ripples through the North American economy.
Each new home generates hundreds of thousands of dollars in purchases ranging from labour, cement and lumber all the way to chandeliers and big-screen TVs.
Unfortunately for Canada, this great economic engine is still gearing down. At the height of the housing boom in 2005 and 2006, Americans were breaking ground on new homes at a rate of more than two million a year. In December, housing starts fell to a new postwar annual low of 550,000, according to figures released yesterday.
Recessions have little regard for national boundaries - least of all the 49th parallel.
"Canada can't insulate itself," said Craig Alexander, deputy chief economist at Toronto-Dominion Bank. "It's going to go along for the ride."
It all starts with Canada's heavy reliance on exports to its southern neighbour. The percentage has slipped over the past decade, but nearly 80 per cent of Canadian goods exported still go to a single foreign customer: the United States. And those exports contributed roughly 22 per cent of economic activity. Add in services, and the U.S.-centric orbit of the Canadian economy is even more pronounced.
Americans aren't just buying fewer homes: it's cars, computer software, potash and a whole lot else.
U.S. businesses are retrenching at an alarming rate, buying less and demanding lower prices.
Exports aren't the only conduit for the radiating U.S. economic pain. As the world's largest consumer, the United States helps set the price of the major commodities that Canada depends on for much of its wealth: oil, forest products, minerals and agricultural products.
The price of oil has plummeted to roughly $40 (U.S.) a barrel from more than $147 as recently as six months ago. Other commodity prices have also fallen, though not as sharply.
With the eastern part of the country already in recession, the commodity price collapse brought down the West, according to TD's Mr. Alexander. This year, the economy is expected to shrink in every province, except Saskatchewan.
"We didn't feel the effect of what was going on in the U.S.," said Stéfane Marion, chief economist at National Bank Financial Inc. in Montreal.
The root problem is that U.S. banks and their consumer customers took on too much debt, Mr. Marion explained. That isn't the case in Canada, but it's still our problem.
"We are in the second phase of the recession," Mr. Marion said. "The second wave is coming from the auto industry and the drop in commodity prices."
The U.S. problems have also migrated northward through the credit markets, upon which companies on both sides of the border rely to finance their operations. Tighter credit in the U.S. quickly led to the same in Canada.
"To a large extent, the Canadian economy is integrated north-south, not east-west," Mr. Alexander said. "The Canadian economy gets hit from all of these channels."
If you look back over recent decades, the correlation between U.S. and Canadian economic cycles, it's a virtual perfect match, said BMO Nesbitt Burns economist Sal Guatieri.
"It's almost impossible to avoid the U.S. fate," he said.
Canada suffered more than the United States during the recessions of the early 1980s and 1990s, weighed down by higher interest rates and government deficits.
The good news now is that economists don't expect Canada's slump to be as bad.
"The Canadian recession will be half as bad and half as long as the U.S. recession," Mr. Guatieri predicted.
Another bonus for Canada is that it's about to get what amounts to a double dose of economic stimulus.
There's Mr. Harper's plan, and then there's Mr. Obama's $800-billion-plus (U.S.) package.
It hardly matters how all the money is spent because the same channels that spread this made-in-USA recession to Canada will eventually carry the next economic expansion northward.
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