- Prime Minister warns against the trap balanced budget "
- fiscal boost comes amid talk of monetary policy has lost bite
Canadian Prime Minister Justin Trudeau urges world leaders to rely more on government spending and less on monetary policy to boost growth as it prepares a budget that will push the country into deficit.
a large interview Wednesday in Vancouver, Trudeau emphasized the importance of infrastructure spending and measures to strengthen the middle-class incomes it says are essential to growth. He also defended his plan to voluntarily go into the red.
"My message to other heads of government is not to fall into the trap thinking that balancing the books" is an end in itself, he said. "It is a way for an end. "
Trudeau's arrival on the world stage and its approval of the deficits mark a sharp turnaround from his predecessor, Stephen Harper. with German Chancellor Angela Merkel and UK Prime Minister David Cameron, Harper defended the alliance fiscal austerity in the Group of Seven, often in conflict with the United States on fiscal policy.
President Barack Obama will hear a new message next week when organizing a state dinner for Trudeau in the White House. Canadian leader debut also coincides with a growing sentiment in global circles that monetary policy is reaching its limit, fueled in part by the surprise move of Japan to adopt negative interest rates that have caused turmoil in the money markets.
"Making money so policy and fiscal policy are aligned and complementary is obviously an advantage for any economy. At the same time, I do not want to be too preachy," said Trudeau. Other countries should consider balanced budgets where possible ", but are not the be all and end because you might miss opportunities to grow your economy - to help people prosper - too much stiffness would actually interfere with. "
G20 Consensus
a group of 20 meeting in Shanghai last week in the presence of Minister Trudeau Finance Bill Morneau, officials of major economies of the world have committed their governments to do more to boost growth amid mounting concerns about the power of monetary policy.
Trudeau, 44, has hinted he plans to expand on the commitments his country on pace to a deficit of nearly C $ 30 billion ($ 22.3 billion) for the year that begins April 1. Having pledged C $ 10.5 billion in new spending during the campaign, Morneau made a financial update last month showing that the government is a deficit of C $ 18 4 billion that Canada is struggling with the oil shock.
"It is for me, even more of a reason why we need to invest wisely in infrastructure money in the pockets of the middle class, grow the economy" Trudeau said the budget situation, he inherited after winning a majority in the election on 19 October.
Debut budget
he offered no details of that new spending can be included in the budget, due March 22, but excluded surprises big-ticket. "I do not think we need massive stimulus," he said. "There is a limit to how much you can run infrastructure dollars in a short time from a standing start."
A C $ 30 billion deficit would be 1.5 percent of gross domestic product. This is a swing of 1.4 percentage points, from a projected deficit of 0.1 percent of the current GDP of the year. Since the end of World War II, there had only four budget swings from year to expand more than 1.4 percentage points of GDP.
Even with C $ 30 billion in red ink, debt to Canada's GDP would among the lowest in the G-7. "This leaves us with more flexibility," said Trudeau. "If we sat at 0 percent debt to GDP, we probably would not contemplate the kind of things we know that we are able to do so if the interest rates were radically different -. Much higher, take the money to invest in our economy - we would be looking at different types of investments "
Anemic. growth
Slump products prompted the Bank of Canada to reduce its rates twice last year to 0.5 percent, and has clouded the economic outlook. This week Statistics Canada reported that production increased by only 1.2 percent in 2015, down from 2.5 percent in 2014. For Trudeau, a reason to spend more instead of tightening to eliminate deficit, as Harper had argued during the election campaign last year.
"Cuts would have been terrible for the economy," said Trudeau.
the new premier will stop short, however, open endless taps, reiterating the commitment to reduce Canada's debt to GDP ratio over time.
"balance fiscal responsibility that the Liberals have always had an understanding that in order to grow, we need to invest," he said , "is the balance we are working hard to strike."
Bloomberg
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