OTTAWA — As the sovereign debt crisis rocked Europe and the U.S. economy spun its wheels with a jobless recovery, Finance Minister Jim Flaherty remained the steady hand at the tiller in 2010 on his way to being voted The Canadian Press business newsmaker of the year.
With the loonie near parity with the U.S. dollar and signs of the economy recovery taking hold, Flaherty could boast of a record better than most of his peers around the world in 2010.
“I think what we saw not only in Canada, but around the globe was a very aggressive policy response,” said Paul Ferley, assistant chief economist at the Royal Bank.
“And certainly the infrastructure program, as well as various tax cuts in hindsight, look like they have been very successful in terms of helping to sustain the recovery.”
But despite his success in helping keep the Canadian economy on track, the coming year brings even more challenges for the finance minister as the vast majority of the stimulus spending comes to an end and he faces the task of balancing the budget to meet his target of 2015-16.
“I think the government did well in terms of identifying just how deep the economic hit was and opted to respond in kind,” Ferley said.
“Now the fallout from that are a fairly large debt and deficit, numbers not as bad as what we are looking at south of the border or in Europe, but still, imbalances that at some point will need to be addressed.”
Flaherty has said there will be no major new spending in his 2011 plan, but also there will be no major new cuts either.
“In 2010, it became clear that Canada had emerged from the deepest worldwide economic crisis since the 1930s in relatively good shape,” Flaherty said.
“But we are mindful that the recovery is fragile and there are still too many people out of work. So we are sticking to our plan.”
After a record deficit of $55.6 billion last year and a shortfall of $45 billion expected this year, Flaherty is expected to start erasing the red ink as the government’s two-year $47-billion stimulus package comes to an end.
But with the economic recovery still finding its feet and the Liberals making noise about trying to force an election in 2011, the budget will be key when the minister rises in the House of Commons to deliver his plan this spring.
“Canada has an excellent reputation for its fiscal performance internationally and I want to maintain that,” Flaherty said.
“At this point, the way we will do that is getting back on a firm track to a balanced budget. We will demonstrate our commitment to that again in the budget we will introduce in the next few months.”
And as the Bank of Canada is expected to resume increasing its key interest rate, Flaherty and central bank governor Mark Carney have started raising concerns about Canadian household debt.
Though Ottawa moved to stiffen mortgage rules in 2010, the second time Flaherty has made such a change, many have suggested even more restrictive rules may be needed.
“I expect the banks to show prudence in their lending practices without me having to tell them to do it, but if they insist, we’ve done it before and we’ll do it again.”
The veteran finance minister edged out Saskatchewan Premier Brad Wall for top choice in the survey of 108 print and online business news editors and broadcast news directors, garnering 21 votes. Wall, who led a successful campaign against a hostile foreign takeover bid for PotashCorp., received 19 votes.
Wall was the loudest voice against the nearly $40-billion deal, which would have been the largest corporate takeover in Canadian history but was ultimately blocked by federal Industry Minister Tony Clement.