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Ottawa, 6 December, 1995
1995-102
Finance Minister Sets 2-per cent Deficit Target for 1997-98 to Boost Job Creation and Growth
Finance Minister Paul Martin announced today the federal deficit for 1997-98 will be brought down to 2 per cent of Canada's Gross Domestic Product (GDP) as an essential part of the government's fundamental commitment to job creation and economic growth.
The Minister appeared before the Standing Committee on Finance to present an Economic and Fiscal Update. The document provides basic economic and fiscal information for the process of policy review and public debate leading up to the 1996 budget.
"Those who would have Canadians believe that there is a contradiction between deficit reduction and job creation are simply wrong," Minister Martin said, emphasizing that getting the deficit down is one of the most effective ways to get interest rates down, and that is one of the greatest direct contributions we can make to job creation.
The 2 per cent of GDP deficit target is estimated to be approximately $17 billion in 1997-98. "Furthermore, this means that the government's new borrowing requirements on credit markets in that year -- which is the way many other governments, the United States, for instance -- calculate their deficit -- will be less than $7 billion, that is, less than 1 per cent of GDP.
"That means that by 1997-98 the government's new borrowing requirements -- in relation to the size of our economy -- will be at their lowest level since 1969," Mr. Martin said.
The Minister confirmed that the government remains on track to meet the 1995-96 deficit target of $32.7 billion as well as the target of $24.3 billion -- 3 per cent of GDP -- in 1996-97.
This continuing progress reflects the impact of the $20.4 billion in budget savings over three years from actions introduced in the 1994 budget, followed by an additional $29 billion in actions in the 1995 budget. The combined impact of these measures in 1996-97 will exceed $21 billion, rising to more than $25 billion in 1997-98 -- with the vast majority of the savings from expenditure reduction.
The setting of the 1997-98 target follows the government's established strategy of announcing two-year rolling targets for deficit reduction.
In emphasizing the government's continuing commitment to deficit reduction - and, ultimately, deficit elimination - Minister Martin underscored that "Our fundamental problem remains a debt that is growing faster than our economy."
He said that the relationship between a growing debt and the economy - the debt-to-GDP ratio - underlines that there are two strategic elements that the government must concentrate on.
"One is to keep our spending under firm control. The other is the necessity to maximize the nation's potential, its productivity, its capacity to grow, to create jobs. The debt is about what we owe. The GDP is about what we do."
This synergy between economic growth and deficit reduction is the foundation for the government's "steady pace" approach to sustained fiscal reform, Minister Martin explained.
Minister Martin emphasized structural reform of government as a critical element in helping boost Canada's potential for job creation, growth and fiscal renewal. And the core of more effective government must be the recognition that Canada must embrace the implications of an increasingly interdependent world.
"This means in areas where only the federal government can provide leadership and direction, its efforts should be enhanced. It also means that in areas where others are better positioned to serve the needs of our citizens, further reform must occur," Minister Martin told the Committee.
The Minister reiterated the federal government's commitment to take action to assure the sustainability of Canada's social programs.
Other points in the Economic and Fiscal Update:
- Economic growth resumed in the third quarter of 1995, after the unexpected weakness of the first half. In the U.S., growth also picked up in the third quarter, and conditions are right for the expansion to continue at a moderate pace through 1996.
- Private sector forecasts show 2.4 per cent real economic growth in 1996. Short- and long-term interest rates are projected to be significantly lower than forecast in the February 1995 budget. For fiscal planning purposes, the government is basing the fiscal outlook on assumptions that are more "prudent" than in these private sector forecasts.
- The revenue outlook is lower than anticipated in the 1995 budget because of lower than expected growth. However, this is offset by the lower-than-expected levels of interest rates which reduce interest costs on the federal debt. As a result, both the 1995-96 and 1996-97 deficit projections remain on track.
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For further information:
Peter DeVries
Economic and Fiscal Policy Branch
(613) 996-7397
Nathalie Gauthier
Press Secretary
(613) 996-7861
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| Last Updated: 2002-11-26 |
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