February 1, 2002
New York, New York
There was a time not too long ago, when representatives of the Government of
Canada, myself included, did not exactly rush to New York – the centre of
world commerce – to talk about the condition and future prospects of our
economy.
Our modesty was understandable. Because quite frankly, we were in very rough
fiscal and economic shape.
Times have changed. I am pleased to be here, at this special meeting of the
WEF in New York, to do something that, in my view, we Canadians don’t do
nearly enough.
I am here to talk about our success. To give you facts, not forecasts. And
the facts tell
a great story. A story about how, through the hard work, sacrifice and foresight
of our people, Canada is extremely well-positioned. Not only to weather the
current global economic slowdown, but to prosper in the recovery that will
follow, and for years to come.
I first came to New York to talk about the Canadian economy in 1998. At that
time, we were marking an historic fiscal watershed. Our government had just
delivered the first balanced federal budget in 30 years.
Last December, we tabled our fifth straight surplus budget. And even with the
slowing world economy, we expect to balance our books for at least the next two
years. In fact, we are the only G7 nation projected to weather the current
slowdown without falling into deficit.
In 1998, I said that we were positioned to put our debt to GDP ratio, then
among the highest in G-7, on a permanent downward track. Since then, we have
paid down $36 billion of our public debt. Over $17 billion as recently as last
year. Our debt-to-GDP ratio has fallen faster than any other major
industrialized nation. By 20 % since 1995. And it is on course to fall below 50%
next year, for the first time since 1985. Moreover, our foreign debt has dropped
from 45% to 20% as a share of GDP. That is its lowest level in 50 years. And
lower than the United States, I might add.
In short, ladies and gentlemen, our fiscal situation is not just in order. It
is stellar.
To fully grasp the fundamental soundness of our economy, it is worth looking
at where we stand today, compared to the onset of the last period of global
economic weakness, in 1990.
In 1990, inflation stood at 4.8%. Compared to 2.6% last year.
In 1990, the commercial prime rate and one year mortgage rates peaked at just
over 14%. Today, the commercial prime is under 4%. And the one-year mortgage
rate is just above 4%. Both of these are 40-year lows.
In 1990, we were struggling with a current account deficit which peaked at 4%
of GDP. Today, we enjoy a current account surplus of 3.4% of GDP. A sharp
contrast, I might add, to the United States, whose current account deficit
stands at 4.0%.
This week, KPMG released a study naming Canada the most cost-effective
country in which to do business. It surveyed 85 cities in nine countries –
including the United States, Japan and Europe – and found that Canada offers
the lowest after tax business costs, as well as low energy, transportation,
construction and overall labour costs.
These statistics are impressive. But they tell only part of the good news
from Canada. Our rock solid commitment to fiscal discipline is the foundation
upon which we have taken important steps, in this time of slowness, both to
stimulate the economy and make key strategic investments that will prepare
Canadians to prosper in the long term.
For instance, coupled with tax cuts already flowing through the economy, our
latest budget is providing a boost to the economy of 2.4% of GDP this year. We
have implemented the largest tax cut in Canadian history. Most of which is
already in effect. It will see personal income taxes fall on average 35% for
Canadian families with children. And corporate tax rates will fall about five
percentage points below average U.S. rates. A strong incentive for new
investment in Canada. Our capital gains taxes have been cut steeply. In fact,
Canada’s top rate on capital gains is now lower than the typical top rate in
the U.S.
In the wake of September 11
,
we have announced significant new strategic investments that will make our
shared border with the United States more secure. And will also eliminate
bottlenecks in key trade corridors. So that we protect and enhance the high
volume and velocity of goods and services that are already exchanged in what is,
by far, the largest trading relationship in the world.
And we have made significant new investments in support of our government’s
overriding economic objective. To make Canada one of the most innovative nations
in the world. A magnet for the best minds and ideas. For new investment and new
ventures. For new discoveries and breakthroughs.
We have already taken extraordinary strides in creating an environment of
excellence and inclusion in which all Canadians can take advantage of their
talents, their skills and their ideas. In which imagination, skills and
innovative capacity combine for maximum effect.
Canada is now one of the most connected countries in the world. Among G7
nations, we have the highest percentage of the population on-line. With every
school and library linked through the Internet.
We have the most generous R&D tax incentives in the world. Our colleges
and universities are among the best in the world. Leading high-tech clusters can
be found right across the country. In Vancouver, Calgary, Waterloo, Ottawa, and
Montreal. And new centres are emerging.
Many world renowned firms got their start here. Firms like Research in
Motion. Their Blackberry device that clips on your belt sends and receives
wireless e-mail. It is all the vogue on Parliament Hill and on Capitol Hill. A
fine example of Canadian technology, Canadian entrepreneurship, and global
success.
Our government has also made bold and forward-looking investments to assist
all Canadians get life-long access to the tools and skills they need for success.
And to lay the foundation of a state-of-the-art research environment. We are
working with our researchers and our entrepreneurs to make sure that Canada is
the place where new products and processes get to market first and fastest.
We also know that we can and must do more. And we continue to challenge
ourselves with ambitious new targets.
We will double the federal government’s investment in R&D. Helping to
position us among the top five countries in R&D performance by 2010. We are
creating 2000 new Research Chairs in our universities. To comprehend the
potential impact of this initiative in Canada, consider what the impact would be
if the American government created 20,000 new research chairs. And we will soon
unveil a new Innovation and Skills strategy. A blueprint for the future that
covers areas such as skills, research and cluster development. It will recommend
how Canada can go further. In a partnership of the federal government, the
private sector, academia and other levels of government.
In other words, the message I bring to you today, is that, for Canada, the
best is yet to come. With a sound and growing economy. With an investment and
business climate that is among the best in the world. With talented people who
are well schooled and well-trained. Where the Maple Leaf is a 21