Finance minister Jim Flaherty defended the Conservative government’s economic and fiscal statement on Friday, reiterating that the government will implement additional economic stimulus if necessary, but will strive for a balanced budget in the meantime.

Speaking in Toronto, Flaherty said he hopes the government will not have to resort to temporary economic stimulus.

“We see what temporary stimulus does: it helps for a quarter and then it causes a falloff in the following quarter,” he said.

“Of course I hope the economy will be strong and we won’t need additional stimulus into the Canadian economy,” Flaherty added, “but if it’s necessary to do so, we will do so.”

He said permanent stimulus measures that the government took in 2006, including corporate tax cuts and a reduction in the GST — already amount to roughly 2% of GDP in 2009. This is higher than stimulus measures taken in the United States and the United Kingdom, which amount to between 1.1% and 1.2% of GDP, Flaherty said.

“We have a very substantial stimulus in the Canadian economy,” he said, adding that it’s success has been proven by the fact that the economy has outperformed other G7 economies this year.

Flaherty also defended criticism that the economic forecasts underlying the fiscal statement are unrealistic, explaining that the government relied on the forecasts of private sector economists.

He emphasized that the government’s key goal is to achieve a balanced budget. “This government does not take the risk of a deficit lightly,” he said.

On the pension front, Flaherty stood by the government’s proposal to double the length of time required for solvency payments for pension plans, despite criticism that it falls short of necessary action.

“What we did yesterday will be of significant assistance to pension plans in Canada,” he said.

He added that the government recognizes that other issues around pensions exist, and said when the finance ministers meet in Saskatoon in mid-December, they would spend “substantial time” discussing the topic.

Speaking about the measures proposed to give the government more authority to support the financial system in extraordinary circumstances, Flaherty said he hopes such authorities would never need to be exercised.

“I hope we do not have to use them, but I know that to be prepared, they should be there.”

Flaherty said the Conservatives had sought to meet the expectations of Canadians with the fiscal update, since Canadians expect the government to strive for a balanced budget.

“We expected to have the support of Parliament,” Flaherty said.

He reiterated that the fate of the minority government depends on the approval of the plan by the opposition parties.

“This is the financial plan of the government of Canada. This is a matter of confidence.”

IE