OTTAWA – Finance Minister Bill Morneau uses this week’s meeting of industrial nations to promote Canada’s economic blueprint just as one path for improving growth and financial stability in other member countries.
Morneau will join his G20 counterparts on the global stage during a two-day summit beginning Friday in Shanghai – a conference which comes in a critical here we are at economies now facing renewed threats to growth and financial stability.
While there’s general agreement one of the G20 that the world is facing a major challenge to reverse a slowdown among the richest economies, there’s less frequent ground on which to complete about it.
As head from the G20 this year, host China intends to push for movement on overall economic structural reforms and infrastructure investment, as well as encourage more work on reforming financial regulations and improving oversight on international tax regimes.
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But issues surrounding monetary and fiscal coverage is prone to contain the spotlight – along with a slowdown in China’s own economy and domestic market volatility, along with the outlook for oil prices as well as their impact on global growth.
Canada’s finance minister is anticipated to create towards the table the requirement for actions like the new Liberal government’s plans to pump vast amounts of dollars into our country’s economy – targeted on infrastructure spending and tax breaks for middle-class families – to advertise long-term growth.
“I is going to be proud to reconfirm Canada’s method of economic growth when i use my fellow G20 finance ministers to strengthen the global economy and help create prosperity for all of our citizens, specially the middle-class and the most vulnerable people in our societies,” Morneau said in a statement.
“Our government believes that smart investments in the economy, including investments in research and innovation, produce the conditions necessary for a good standard of living, a secure retirement, and prospects for future generations.”
Morneau will push the Liberal intend to target regulations for that middle-class, support for additional needy Canadians and investments in infrastructure – which the federal government says will make sure the benefits of a long-term growth strategy are spread over the economy, a senior Finance official said inside a background briefing for reporters on Thursday.
That might be a hard sell for many of Canada’s G20 partners.
“Negative interest rates are proving insufficient to get back to full employment globally, and fiscal policy will be a more powerful tool,” said Avery Shenfeld, chief economist at CIBC World Markets.
“But it’s hard to see the eurozone backing fiscal stimulus and greater deficits within their region, given Germany’s political bent, and Japan seems dedicated to higher sales taxes,” he added. “China has room to increase deficits and cut interest rates further and will also be encouraged through the G20 to do this.”
The International Monetary Fund has already highlighted the gulf between what is accomplished and just what might actually be achieved through the G20.
With the collapse in global oil prices, any move to help restructure weaker economies might be compromised by disappointing development in leading countries, including in Canada in which the plunge in crude has pushed Alberta and Newfoundland and Labrador into recession, and could now perform the same nationally – just months following a mini-recession in the first 1 / 2 of 2015.
In a study released Wednesday, the IMF said the G20 “must plan now for co-ordinated demand support using available fiscal space to boost public investment.”
For Canada’s Liberals, elected in a federal vote in October, the continued deterioration of the global economy, with few indications of a sustained rebound in oil prices, has forced the government to drastically revise its deficit outlook with this fiscal year – now likely to be more than $18 billion, even though many economists say it could reach $30 billion.
The final tally will be contained in Morneau’s 2016-17 budget, to be released March 22.
“There is definitely an increasing view around the world that government should be considering stimulating growth a bit more around the fiscal side,” said Emanuella Enenajor, senior economist at Bank of America Merrill Lynch in New York.
“The proven fact that Canada is actively doing that, or perhaps is dedicated to doing that, I think constitutes a lot of sense because of the fiscal room the government has,” she said.
“I think Canada is in a distinctive position among the G20 so that you can do this. Of course, we must notice that government spending is merely a Band-Aid solution. Greater spending by Ottawa is going to temporarily support growth. It cannot be trusted to be a sustainable growth driver, and it will need an ending point.”
gisfeld@nationalpost.com
Twitter.com.gisfeld
