NEW YORK, NY (February 1, 2002) – 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 11th, 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 21st century trademark for confidence, optimism and excellence.