May 17, 2001

Thanks to our prudent fiscal planning and our balanced approach to government spending, Canada remains on sound financial footing for the years ahead – despite the recent economic downturn.

The 2001 Economic Update confirms that our government can meet all of the commitments made in Budget 2000, in the October 2000 Economic Statement and Budget Update, and during the last election campaign, while protecting the bottom line.

We will deliver this year alone some $24 billion worth of stimulus to the Canadian economy - one of the most stimulative packages of any industrialized country.

And we will increase substantially our previously announced payment on the debt, which will total more than $15 billion rather than $10 billion for the 2001-02 fiscal year.

This will bring our total debt repayment to at least $33 billion since 1997-98 – reducing our interest payments on the debt by at least $2 billion annually, and allowing us to use this money year after year to respond to the priorities of Canadians, such as health care and tax cuts.

Our government will remain vigilant in the coming months. We will continue to cut taxes and debt, and we will continue to control spending so that Canada remains on a solid financial footing.

Although we are experiencing a slowdown, our economy will continue to grow. The average estimate for economic growth by private sector economists for 2001 has been revised from 3.5% to 2.4%, and the estimate for 2002 has been revised from 3% to 3.4%.

These fluctuations will have a relatively modest impact on our projected surpluses. Surplus projections have been revised down from $8.3 to 7.2 billion in 2001-02, and from $7.6 to $7.3 billion in 2002-03. Even under the most pessimistic of economic forecasts, we will continue to generate fiscal surpluses.

Because we always took into account the possibility of an economic slowdown in our budget making process, we remain in a position to meet all the commitments we made in Budget 2000, in the October 2000 Economic Statement and Budget Update and in the election campaign.

These commitments include:

The largest tax cut in Canadian history – some $100 billion in tax relief over five years, the majority of which will go to moderate- and middle-income Canadians.

The largest investment in health care in Canadian history – $21.2 billion over five years available to the provinces for health.

A $2.2 billion investment over five years in Early Childhood Development, to ensure that all Canadian children get the good start they need in life.

Under our government, Canada has enjoyed some 22 consecutive quarters of growth – the longest period of economic expansion since the 1960s.

And while expectations for growth have recently been reduced, the outlook for the next two years remains positive: our tax cuts will continue to support growth, declines in interest rates will continue to encourage investments and consumer spending, and targeted federal investments will provide additional stimulus.

In keeping with our record and the commitment we made in Red Book III, we will continue to budget in a fiscally responsible manner. We will proceed with our prudent, balanced plan and remain on track to becoming the first federal government in 50 years to table 5 straight surplus budgets.

With this in mind, the Government of Canada and the Bank of Canada are extending for another five years the current agreement on inflation targets, which remains between 1% and 3%. By continuing to brand Canada as a low inflation regime, we will help promote higher growth and low interest rates for the benefit of all Canadians.