Canada's economy: bad, but it could be worse

We may be on shaky ground, but we're doing much better than everyone else. That was the message of Jim Flaherty's budget update yesterday, but is there more he wasn't saying?

If you are anything like us here at The Mark, you were glued to your computer screens yesterday in anticipation of a great drama about to unfold. No not that thing, but Finance Minister Jim Flaherty’s long-awaited fall budget update! Some highlights of his speech: Canada will eliminate its $55.6 billion deficit by 2015-2016, and has emerged from the recession much better than other countries, although our recovery is fragile.

“When a finance minister can simultaneously announce the biggest fiscal deficit in Canadian history, no prospect of balancing the books for at least five years, and also claim — truthfully — that Canada is a relative model of fiscal prudence, then you realize that you are living in interesting times,” writes the Financial Post’s Peter Forster. And by interesting times he means, “you are still living on the edge of a global economic precipice.” So that’s what that queasy feeling is.

The Montreal Gazette’s L. Ian MacDonald says that the Conservatives have learned their lesson from the 2008 budget, which caused such controversy because of its proposal to eliminate federal subsidies to political parties that Stephen Harper had to prorogue Parliament and shut ‘er down for a couple of months. That lesson is “deliver the fall update away from Parliament, thus taking it off the floor of the House of Commons as a potential confidence vote.” This accounts for Flaherty delivering the update at a Mississauga meeting of the Chinese Business Association yesterday, not exactly the center of the Canadian political universe.

A Globe and Mail editorial also compares this budget announcement with “the ill-fated” 2008 update, saying yesterday’s announcement was “similar … in that it contains little that is new, but the effect is quite the opposite.” In 2008, “the apparent lack of initiative was alarming in the face of the international financial crisis. Now, it is reassuring that the federal government's financial record and projections are reasonably close to what the 2009 and 2010 budgets planned for.” When you’re dealing with an economy as unpredictable as this, it’s best not to make any sudden movements.