Due to changes in the global economic climate, the rate of growth in Canada’s economy will slow down causing reduced federal revenues. This was the analysis provided earlier today, when Finance Minister Jim Flaherty delivered his fall economic update in a speech to the Chamber of Commerce in Fredericton, New Brunswick.

More specifically, Minister Flaherty announced a reduced forecast for federal revenues over the next five years, which is expected to cause a corresponding jump in Canada’s deficit this year to $26.2 billion – up $5.1 billion from the minister’s projection in March 2012. As a result, the government’s objective of eliminating the federal deficit has been delayed by a year to 2016-2017.

While today’s update has slightly adjusted the timelines for Canada’s return to balanced budgets, the Harper government’s larger economic agenda and priorities remain unchanged.

The Harper Government’s Economic Agenda
Last week, Prime Minister Stephen Harper spoke about Canada’s economic agenda at the World Economic Forum in New Delhi. While his remarks at the same forum in January signaled important changes to Old Age Security and other programs, last week’s remarks simply reaffirmed that the government will be staying the course with its current agenda.

It remains the Prime Minister’s strong belief that there is no guarantee of a high standard of living for Western economies, and that they must take determined actions to maintain the lifestyle their citizens have enjoyed for the past half century. Prime Minister Harper laid out, in broad strokes, the five action areas his government is focused on to ensure prosperity. They are:

  • Fiscal restraint: Keeping taxes rates low while both restraining and reforming government expenditures and operations to achieve a balanced budget in the medium term. The minister noted that direct program expenses are not expected in increase over the next four years.
  • Labour market reform: Through a combination of investments in training and higher education, reforms to the immigration system focusing on skilled workers, and changes to the Employment Insurance program, the government is working to create better connections between workers and available jobs.
  • Transforming the innovation environment: The government is modernizing its approach to research and development policy and focusing on gaps in the innovation pipelines in order to improve Canada’s performance in research commercialization.
  • Reducing red tape and reforming regulations: Work continues on the government’s agenda to streamline environmental review processes, increase business predictability and reduce the bureaucratic burden on the private sector.
  • Increased trade: The agenda to diversify the flow of Canada’s trade continues in earnest with the priority remaining new agreements with the European Union, the Trans-Pacific Partnership and India.

The Prime Minister ended his speech by talking specifically about the new trade deal being negotiated between Canada and India. His closing line summed up not only his attitude towards the trade deal, but the government’s economic agenda as a whole: “It won’t be easy, but it can be done, so let’s get it done quickly and it will be worth it.”

The Continued Implementation of Budget 2012
Each of the priority areas that Prime Minister Harper outlined in his World Economic Forum speech were in part addressed in the 2012 federal budget. While many of the changes brought about by this budget were implemented in June, the process of full implementing the budget is still working its way through Parliament. The second budget implementation act, Bill C-45, implements announced changes to pass the SR&ED research tax credit, the Navigable Waters Protection Act, the Canadian Labour Code and extension of the hiring credit for small business. The government also recently tabled a ways and means motion related to a number of technical amendments to tax code and which will result in a third finance bill this year.

The government’s aim is to have Bill C-45, the Jobs and Growth Act, 2012 proclaimed before Parliament rises for the winter break on December 14th. All House of Commons committees currently studying the bill are due to report back to the House by November 22nd, while the Senate has been pre-studying the bill at various committees to expedite its passage when the bill arrives before the Higher Chamber. Clearly there is a very limited window of opportunity for organizations who still want to have a say on Bill C-45. There were no amendments to the first budget implementation bill and none are expected for the second. This means the regulations that will follow the bill’s passage are an all the more important tool for dealing with concerns.

Preparing for the 2013 Federal Budget
When appearing before the House of Commons Standing Committee on Finance to discuss Bill C-45, Finance Minister Jim Flaherty started hinting at the direction of Budget 2013. Minister Flaherty said the government is closely monitoring the global economic situation, particularly the sovereign debt situation in Europe and the “fiscal cliff” in the United States. If there is a significant slowdown in the global economy, Minister Flaherty said the government is prepared to introduce stimulus measures to the Canadian economy. The minister further stated that the government proved that it knows how to bring in stimulus measures in 2009, but that does not mean it would necessarily use the same stimulus measures if needed this time.

Hill+Knowlton Strategies does not anticipate the government to be definitive about a stimulus package at least until the new year. By then, the government should have a clearer picture of how the US has handled the fiscal cliff situation and the potential impacts of the change in leadership in China.

In addition, the government made a number of strategic changes in the deputy minister ranks this fall and will want to give certain key deputies the time necessary to bring forward plans for their departments. Most notably, among the new deputies, John Knubley the Deputy Minister of Industry Canada, Yaprak Baltacioğlu the Secretary of the Treasury Board, and Simon Kennedy Deputy Minister of International Trade are expected to have a significant impact on government priority areas.

Finance Canada will also be looking to hear directly from the public as it will be asking for formal submissions in the next two weeks. Similar to last year`s submissions they want to know what government programs are working, what programs are not working and what would your organization suggest to create jobs and continue economic growth.

What It Means for You
The government will be looking for opportunities and support as it continues down its chosen path for economic growth. Companies and organizations need to be aware of stimulus programs that may be created and be positioned for success in securing government funding for infrastructure projects. Organizations with funding needs outside of infrastructure will want to ensure that their proposals are strongly linked to the government`s agenda of economic
renewal and increased employment; they should identify economic drivers that do not cost the government funds.

Hill+Knowlton Strategies is able to provide support for clients with sector specific information to understand where the government will be focusing its efforts in the medium term. We are able to help clients communicate with the government on the scope of a program should the government decide to introduce a stimulus program in the coming months. Hill+Knowlton Strategies also helps clients position their issues and focus advocacy efforts to deliver success.