OTTAWA—A day after the Bank of Canada lowered interest rates to
cushion the oil price shock, Prime Minister Stephen Harper
played down the damage faced by the Canadian economy.
“These things are creating some shocks that will impact us but
they’re not going to throw us off our fundamental growth path or
undermine the very strong fundamentals of the Canadian economy,”
Harper told reporters during a visit to St. Catharines.
He said the impact of the oil price decline will be significant
but added that the Bank of Canada’s action does not indicate
that the Canadian economy is in worse shape than Ottawa has
acknowledged. Nor does it indicate that the federal government
should be looking at bringing in stimulative spending measures
to prop up the economy, Harper said Thursday.
“They (the bank) said the economy will grow somewhat slower than
previously anticipated but they do anticipate growth for the
coming year,” Harper told reporters.
While expressing concern about the economic problems caused by
plummeting petroleum prices, the Bank of Canada said Wednesday
would pick up later in 2015 after slowing sharply to
a rate of growth of 1.5 per cent in the first half of the year.
For the year as a whole, the Bank of Canada said growth would be
2.1 per cent, down from the 2.4 per cent growth bank governor
Stephen Poloz predicted only a few months previously.
Federal cabinet ministers often avoid commenting on the actions
of the arms-length central bank, but Harper said Poloz’s
surprise move to reduce the Bank of Canada’s trend-setting
overnight rate to 0.75 per cent from 1 per cent was
“The government has complete confidence in the Bank of Canada in
the actions that it has taken,” Harper said.
He added that for the government’s part, the appropriate action
as long as the economy continues to grow is to eliminate the
federal deficit and balance Ottawa’s books. Economists have
questioned whether the Conservatives will be able to fulfill
their promise to eliminate the budget deficit this year because
of the hit on federal tax revenues caused by falling oil prices.
And the federal government said last week that the budget will
be put off from the usual February-March time slot until at
least April so Ottawa can deal with the market instability
sparked by the oil price drop. But Harper reiterated that his
government plans to balance the books in 2015.
He acknowledged that, to head off a slide back into a deficit
this year, Finance Minister Joe Oliver might have to tap the $3
billion contingency fund that is provided annually as a safety
valve in the budget. “The contingency fund is obviously
available for unforeseen circumstances,” Harper said.
He said the oil price decline would have a significant impact on
the oil industry — “there’ll be some pain” — but said the
industry is resilient and will come back. “The oil industry
isn’t remotely the entire Canadian economy,” Harper remarked,
suggesting that the impact of the crunch in the petroleum sector
will be limited.
Harper was in St. Catharines to announce an increase in federal
financial assistance for small businesses.