OTTAWA/NEW YORK (Reuters) – The Canadian government on Friday reiterated its intention to balance its budget by 2015, three days after projecting there would be deficits until 2016-17.
In separate appearances in Quebec City and New York, Prime Minister Stephen Harper and Finance Minister Jim Flaherty were at pains to say they still intended to end the red ink by 2015.
“It remains the government’s plan, intention, to balance the budget prior to the next federal election. The recent economic and fiscal update by the minister indicates we are actually very close to that objective,” Harper told reporters in Quebec City. The next election is in October 2015.
Flaherty’s fall fiscal update on Tuesday had pushed back the target date for eliminating the deficit by a year, to 2016-17, citing a weak global economy.
But the minister said in a speech in New York that the government was on track to balance the budget in the next two to three years, barring major external events, and he later clarified that he intended a balanced budget by 2015.
“The prime minister’s always correct,” he chuckled.
He sought to explain the discrepancy by saying the fiscal update had built in a C$ 3 billion ($ 3 billion) contingency cushion, meaning there was an underlying surplus of C$ 1.2 billion for 2015-16. He said the projection of a C$ 1.8 billion deficit amounted to about half a percent of the C$ 275 billion federal budget.
“There’s lots of water to go under the bridge between now and then,” he said.
The opposition New Democratic Party noted the discrepancy in a release headlined: “Stephen Harper makes stuff up about balancing the budget.”
It pointed out that balancing the budget by the next election was not the same as balancing it by 2016-17.
As it is, even the 2015-16 timetable is a year later than offered in the Conservative campaign for reelection in May 2011. They had promised a balanced budget by 2014-15, followed by major personal income tax relief before the 2015 election.
Flaherty’s timetable drew criticism this week from the Canadian Taxpayers Federation, which said the minister had become expert at kicking the can down the road.
The projections could be thrown out of whack if the United States goes off the fiscal cliff, a set of automatic tax hikes and spending cuts that are to be triggered on January 2 if legislators and the White House cannot agree on a more nuanced budget deal.
Flaherty said U.S. failure to avert the fiscal cliff would cause a significant and immediate decline in Canada’s gross domestic product, and he would counter it.
Referring to a possible economic shock from Europe or the United States, he said: “If that were to happen and if the Canadian economy were to be pushed back into recession with the resulting danger for higher unemployment and the danger always of a prolonged recession, then we would act.”
He added: “We would not stand by and let that happen. The kinds of measure we can take: there are various tax measures we can take, there are measures with respect to stimulus we can take, these are things that we have done before and we can do again.”
On Tuesday, Flaherty spoke of having prepared various contingency plans.
(Additional reporting by Louse Egan; Editing by David Gregorio)
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