Notes for an address by Prime Minister Jean Chrétien on the occasion of the 69th Annual General Meeting of the Canadian Chamber of Commerce

Four years ago I set out key elements of the government's plan. I pledged to address longstanding, fundamental issues. The debt and deficit. Reform of the Unemployment Insurance system. Help for people to keep on learning and improving their jobs skills. Removing obstacles from single-parent families and poor kids. Reducing government spending with a comprehensive Program Review. And a Team Canada approach to trade.

I am pleased to report today that in each and every one of these areas, we have made major progress. Today, I want to set out the course for the rest of this mandate.

Our overriding objective has been, is, and will be to do whatever it takes to produce more jobs, higher incomes and a higher standard of living for Canadians. To achieve this means, as a society, we must enhance our long-term productivity. This requires a comprehensive approach. We must get our economic fundamentals right. Reduce the burden of debt and taxes. Invest heavily in the knowledge and skills of our people. Promote equality of opportunity so all Canadians can contribute and be productive. Ensure a high quality public health care system for all. And the only way to achieve this is if we all work together in partnership.

Many of you here today were at that meeting in Quebec City four years ago. I am sure that back then no one could have imagined that four years later, in September 1998, Canadians would be debating whether we are cutting the national debt and taxes fast enough! Back then, with a $40 billion deficit, we did not have that luxury.

Would anyone, four years ago, have been taken seriously if they had predicted that in 1997-98 we would actually have reduced - for the first time in over 30 years - the market debt of the government? Well, we have done so. And even more important, we will do more each and every year as we go forward.

Four years ago when I spoke to you, the federal debt-to-GDP ratio was 71.6 per cent. Last year, it was about 68 per cent. If current trends continue, by the end of our mandate in the year 2002, the debt-to-GDP ratio should be no higher than 55 per cent - and still declining.

Federal spending on programs, when I last addressed you, was $118.7 billion. This fiscal year, it is forecast to be just under $105 billion. For the first time in fifty years, actual program spending has been reduced.

Not only has the federal government got its fiscal house in order, but provincial governments have also made enormous progress in deficit reduction.

Since the last time I spoke to you, tax rates have started to come down. We have reduced Employment Insurance premiums. We have reduced Customs and Excise tariffs. We have made selective personal income tax cuts where the need was greatest -- particularly, on low-income Canadians with children. We have reduced or eliminated the 3 per cent personal income tax surcharge for 80 per cent of Canadians. In the last budget, we set out a schedule of tax reductions of nearly $7 billion for the following three years. And we are committed - and I repeat that commitment today - to further reduce personal income taxes in our next budget.

Even with the last increase by the Bank of Canada, interest rates, both short and long-term, have been substantially reduced. And you know what that means for consumer spending and business investment.

I recite these statistics not for purposes of self-congratulation, but so that you can be certain that when the Minister of Finance and I articulate the economic policy of the government, the results will be there for all to see. When it comes to the economic credibility of this government, I say don't read my lips; read our record.

I also recite these statistics so that you - and even those famous international money traders - can judge for yourselves and themselves the underlying strengths of the Canadian economy. A balanced budget. Government spending under control. A tax and debt burden which is being reduced. Low inflation. Strong GDP and employment growth. Productivity growth. And a strong international competitive position.

And I might add, that despite certain myths, an economy that is less and less dependent on commodity prices for its exports. The extent that our exports have shifted towards higher value- added products is not fully appreciated. The commodity share of Canada's exports fell from around 60 per cent in 1980 to around 35 per cent in 1997 representing only about 12 per cent of Canada's GDP.

Ladies and gentlemen, what we have accomplished since I last spoke to you is very profound. At the federal level, and also at the provincial level, we have made major permanent structural change to the public finances of the country. We made these fundamental changes in order to give us the resiliency we need to better cope with the ups and downs of the global economy. To give us the flexibility to be able to position ourselves well and the ability to invest for the future.

And while we were making structural changes in terms of public finances, the private sector was making the structural changes necessary to adapt to the new economy and to become more competitive in the global market place. As a result, we have every right to face the future with hope, with optimism, and above all with confidence. But we still have problems and challenges to confront.

The events of the last few weeks have driven home to all of us that we are not immune to what is happening in the rest of the world. And I know how the international turbulence of the last few weeks has filled many Canadians with deep concerns and anxiety about the global economy and our place in it. How else can they feel when events half a world away, beyond our border and our control, directly impact our economy and economic confidence?

I understand their concern. And want to share with you - and them - what we are doing - and what more we can do - to cushion the shocks of global change for the Canadian economy.

First of all, we should recognize that things would be much, much worse in the current international economic environment if we had not gotten our fiscal house in order. The challenge of this mandate is to build on our achievements, take the actions required, and make the investments necessary to improve our long-term productivity so that, over time, Canadians will see a sustained increase in their incomes, standard of living, levels of employment, and their quality of life.

Because, despite the progress we have made, we still must confront some deeply rooted structural economic issues in order to increase productivity. We must address taxes and the debt burden and the need to invest in those types of social and economic infrastructure which will add to the national wealth over time. They are not the stuff of quick fixes. There are no simple, over-night solutions.

It takes time to resolve problems which have developed over more than a quarter century. Remember, it took a whole mandate to get the public finances on the right track, after thirty years of accumulated deficits.

In our first mandate, we were prudent in our projections, and our actions. That is why we were successful. And if we want to overcome current challenges, we must keep up the same approach.

I would love to be able, overnight, to reduce taxes significantly; to reduce the debt significantly; and invest significantly in reinforcing and building a strong economic and social infrastructure in Canada.

But we can only achieve increased productivity through sustainable tax and debt reduction and reinvestment in our economic and social priorities, if we act in a responsible and prudent way. If we build on the foundation we have created and the steps that we have already taken.

Nothing would be more irresponsible, or more damaging psychologically than to make grand gestures which could have the result that we move from finally achieving a surplus to going back into a deficit. This we will not do. We have managed our fiscal house in a manner that gives us resiliency and flexibility. We cannot afford to lose either, and we will not.

The fact is that with the volatility of the current international economic situation, no one can predict exactly how large our fiscal surplus will be for the next two to three years. It will probably be smaller than many forecasters expected only a few months ago. We were then accused of being too prudent. I would much rather be accused of being too prudent with the public finances than with being too reckless.

We know that we must not fritter away an opportunity that is at hand for the first time in over thirty years. There are a lot of pressures on government to increase its spending in a whole range of unrelated areas. We must, and we will resist these pressures. We will concentrate our spending in those few areas which will enhance long-term productivity and create economic growth, more jobs and higher incomes and a higher standard of living.

Furthermore, today, with the uncertainties around the world that were unforseen even a very short time ago, it is more essential than ever that we take the necessary steps to assist a very nervous international market place to recognize both the underlying strength of the Canadian economy and the determination of the Canadian government to stay the course.

As I said earlier, we have already begun to reduce the debt burden of the country. Last year, we repaid $9.8 billion of the market debt of the country, that is of the money the government has borrowed over the years in the markets - domestically and abroad. Already in the first quarter of the 1998-99 fiscal year, we have repaid another $10 billion of the market debt. In 15 months, the market debt has been reduced by $19.7 billion from $476.9 billion to $457.2 billion at the end of June 1998.

In the recent past, other governments would have spent that money. Not us. We know that reduction of the debt burden is absolutely necessary to the long-term economic health of the country. And it is a confidence factor for investors. So, we will continue to reduce our debt burden.

Our spending for this year was set in the February budget. Obviously, in an uncertain environment, we will have to maintain some flexibility to meet new circumstances as they arise. But, apart from this necessary prudence, I can say today that whatever the surplus may be this year, we are not planning any new large expenditures beyond what has already been budgeted for this year. And that will enable us to pay down more on the debt this year than was provided for in the Debt Reduction Plan.

As far as the tax burden is concerned, we are committed as a government to lowering personal income taxes. We are committed to doing so in a sustainable way. When taxes are reduced, we do not want to have to increase them again. We began in our last two budgets to reduce personal taxes. We will continue to reduce them in the next budget in February.

If we want to keep the best and the brightest at home and achieve a Canada that produces well paying jobs in today's global economy, we need to do more than simply reduce taxes and the debt. We can only have strong growth and rising living standards if we also invest in the social and economic infrastructure of our people.

The future belongs to societies whose economies are sound, whose population is healthy, whose children are well prepared, and who invest in knowledge, innovation and education.

We will increase the national wealth by concentrating, as we pledged in our election campaign, and as we have begun in our budgets, on three crucial areas of investment: knowledge and innovation, the alleviation of child poverty; and health care.

We are leading a national effort - an effort that all sectors of society have to work on in partnership - to equip Canadians to compete in a changing world. That's why we are investing in knowledge and innovation and research and development. Because it will mean expanding opportunities for ourselves and for our children.

In the last two budgets, we created the Canada Foundation for Innovation and the Millennium Scholarship Foundation. We alleviated student debt, gave more resources for the Research Councils and created incentives for parents to save for higher education for their children.

Another focus will continue to be reducing child poverty. I know this might not be the first subject that comes to mind when addressing a business audience. But think again. Reducing child poverty is a dollars-and-cents issue that should concern everyone who wants a growing economy and high-wage jobs.

The fact is, we pay a heavy price for having children in our society who grow up in poverty. They are much less likely to receive the education they need to be productive. They are less likely to contribute to the growth of the economy. Statistics also demonstrate greater costs to the health care system and the justice system. We all know the importance of early childhood experience to success in adult life.

Young children should be able to arrive at school at age 6 ready to learn. In collaboration with the provinces, we have established a new National Child Benefit to help low-income families with children. By July 1, 2000, the federal government will be investing $1.7 billion per year in this initiative. It has enthusiastic support from right across the spectrum - from Glen Clark to Mike Harris, with Jean Chrétien in the middle.

Another area that will have an effect on improving our long-term productivity is health care, which must be the focus of our next major investment.

It is very difficult to take on the challenge of the new economy while being preoccupied with the availability of health care. Just ask the parents of an ill child. Or the child of an ageing parent who needs care. Universal access to high quality health care is key to reaching our full potential as individuals and as a country. Canada's publicly funded Medicare system is widely recognized as one of the best in the world. It contributes significantly to the superior quality of life we enjoy in this country. It constitutes a major competitive advantage in today's global market place, particularly in relation to the United States, which is our major trading partner.

While Canadians are proud of their Medicare system, they are also concerned about its future. They know that the health care system must adapt to new technology, changes in demographics, new ways of providing care and the reality that financial resources are not unlimited. Canadians recognize that structural change had to take place in the health care system. But it does not lessen their apprehension that the pace and direction of the recent changes could compromise quality of care and universal access. They are worried about the increased burden of care that is now being shouldered by individuals and families.

It is a very high priority for this government to ensure that all Canadians continue to have access to a high quality public health care system - a system which remains faithful to their needs and to the five fundamental principles upon which Medicare is based. The government will invest more of our resources in the years ahead to reinforce our public health care system - Medicare. We will do so in collaboration with the provinces who are our partners in the health care system. The point is not simply to spend more, it is to ensure a system that gives Canadians the health care they need and that is accountable to them. We will be working very closely with the provinces to continue to build a publicly financed health care system suitably adapted and modernized to meet the needs of Canadians in the 21st century.

Ladies and gentlemen, if you invite me back four years from now to address you again, I hope to be able to say that: