Fall economic statement is prudent document but results will need to be monitored carefully. Bank of Canada might undermine growth and lower unemployment by imprudent interest rate rises.

Canadian Finance Minister Bill Morneau has tabled a very interesting progressive Fall Economic Statement that carefully but sensibly seeks to balance the need for ongoing stimulus of the  Canadian economy with prudent economic management. He is targeting a stable -but still not low enough- unemployment rate and remains very sensibly committed to very modest stimulus deficits combined with a projected declining debt to GDP ratio over the next five years.

There will be critics who understandably question the wisdom of tax expenditures on behalf of business innovation and capital investment pointing to solid profits data for most of the business sector already in place. Furthermore a program which rewards business for innovative investments which target job creation and employment growth in a global economy needs careful monitoring to ensure that what has been promised gets delivered.

The key to the Minister‘s strategy can be found in chart 1.13 on page 23 where the projected deficit which is currently a very modest -0.9 % of GDP declines over the next few years to -0.4 % of GDP by 2023-24.At the same time the debt to GDP ratio currently at 31.4 % is projected to fall to 29.8 % by 2021-22. The government‘s very sensible rational approach to debt management and fiscal policy has been a long time time coming but it is a very welcome policy innovation and compares very favourably with the Conservative party‘s dogmatic obsession with budget balance no matter the consequences.The only potential somewhat unpredictable factors are ill trade winds from south of the border, excessive imprudent interest rate rises by the U.S. Federal Reserve and the Bank of Canada which continue to believe in the notion of inflationary expectations automatically arising even when oil prices are falling and irrational pessimism after a serious bout of irrational exuberance on the global stock markets. As usual, time will deliver the answers.

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About haroldchorneyeconomist

I am Professor of political economy at Concordia university in Montréal, Québec, Canada. I received my B.A.Hons (econ.&poli sci) from the University of Manitoba. I also completed my M.A. degree in economics there. Went on to spend two years at the London School of Economics as a Ph.D. student in economics and then completed my Ph.D. in political economy at the University of Toronto. Was named a John W.Dafoe fellow, a CMHC fellow and a Canada Council fellow. I also was named a Woodrow Wilson fellow in 1968 after completing my first class honours undergraduate degree. Worked as an economist in the area of education, labour economics and as the senior economist with the Manitoba Housing and Renewal Corporation for the Government of Manitoba from 1972 to 1978. I also have worked as an economic consultant for MDT socio-economic consultants and have been consulted on urban planning, health policy, linguistic duality and public sector finance questions by the governments of Manitoba, Saskatchewan,the cities of Regina and Saskatoon, Ontario and the Federal government of Canada. I have also been consulted by senior leaders of the British Labour party, MPs from the Progressive Conservative party, the Liberal party and the New Democrats on economic policy questions. Members of the Government of France under the Presidency of Francois Mitterand discussed my work on public sector deficits. I have also run for elected office at the municipal level. I first began to write about quantitative easing as a useful policy option during the early 1980s.
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