Roadmap to Fiscal Balance and Strategy to Improve Competitiveness Both Crucial to Recovery, CCCE Says

June 12, 2009

Canada’s governments need to develop clear and credible plans for restoring fiscal balance as quickly as possible as the current recession eases, says Thomas d’Aquino, Chief Executive and President of theCanadian Council of Chief Executives (CCCE).

Finance ministers from the G8 leading industrialized countries are meeting today and tomorrow in Lecce, Italy, and are expected to discuss exit strategies from the measures governments around the world have taken to deal with the global economic crisis.

These measures have sharply increased government spending, leading to huge budget deficits in many countries. The danger is that much higher levels of public debt could lead to higher inflation and borrowing costs, which in turn would damage prospects for job creation and a return to sustainable growth.

“Canada’s federal government, in close collaboration with its provincial counterparts, has implemented a range of stimulus measures that are helping workers and their families to weather the severe global recession,” Mr. d’Aquino said. “But as stability returns and we prepare to turn the corner on the worst downturn in decades, now is the time to begin thinking about a roadmap to fiscal recovery.”

Both the timing and the trajectory of a return to growth – here in Canada as well as internationally – remain unclear, although most economists predict that output will be higher in 2010 than in 2009.

One outcome is beyond doubt: by the time the recession ends, public sector deficits and debt in Canada will represent a far more serious burden than at any point in the past decade. In the current fiscal year alone, the combined federal and provincial deficit is expected to exceed $80 billion, equivalent to 5.2 percent of Canada’s Gross Domestic Product.

“Canada was among the last of the world’s major industrialized countries to fall into recession, and there are signs that we could be one of the first to return to growth,” Mr. d’Aquino said. “Likewise, Canada’s fiscal position is far stronger today than is the case in many other countries, thanks in part to the tough choices we made as a society in the 1990s.”

Canada’s aging population, however, means that today’s cyclical shortage of jobs will give way to a structural shortage of skilled labour far more quickly than most Canadians expect.  The shrinking proportion of workers within the population in turn will make it harder to carry excessive government debt while sustaining high-quality public services.

In addition to a fiscal roadmap, Canada therefore needs a clear plan of action to strengthen the country’s competitiveness, Mr. d’Aquino said.  He noted that a year ago, the Competition Policy Review Panel put forward a compelling and comprehensive strategy that would include tax policy, skills development, regulatory reform, corporate governance and the free flow of goods, services, people and investment both within Canada and internationally.

“We applaud the many initiatives that already have been taken by the federal and provincial governments over the past year to strengthen Canada’s ability to compete for people, jobs and investment in the global economy. We have made important progress, but much more needs to be done,” he said.

“As Prime Minister Stephen Harper said in yesterday’s economic progress report, Canada has an opportunity to emerge from this recession both sooner and stronger than other countries. To achieve this goal will require focus and resolve, and as business leaders, we remain committed to working with politicians of all parties and at all levels of government to build a more prosperous Canada.”

The CCCE is Canada’s most influential business association, composed of 150 chief executives and leading entrepreneurs from all major sectors and regions of the country. CCCE members lead companies that collectively administer $3.5 trillion in assets, have annual revenues of more than $800 billion, and are responsible for the vast majority of Canada’s exports, investment, research and development, and training.

In addition to Mr. d’Aquino, the members of the CCCE’s Executive Committee are: Chair, Gordon M. Nixon, President and Chief Executive Officer, Royal Bank of Canada; Honorary Chair Richard L. George, President and Chief Executive Officer, Suncor Energy Inc.; and Vice Chairs Laurent Beaudoin, Chairman, Bombardier Inc., Paul Desmarais, Jr., Chairman and Co-Chief Executive Officer, Power Corporation of Canada, J. Bruce Flatt, Senior Managing Partner and Chief Executive Officer, Brookfield Asset Management Inc., Hartley T. Richardson, President and Chief Executive Officer, James Richardson & Sons, Limited and Annette Verschuren, President, The Home Depot Canada and Asia.