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Canadian Minister of Finance Jim Flaherty listens as Prime Minister Stephen Harper responds to a question during a closing news conference at the G20 Summit in Cannes, Friday Nov. 4, 2011. (Adrian Wyld/the Canadian Press/Adrian Wyld/The Canadian Press)
Canadian Minister of Finance Jim Flaherty listens as Prime Minister Stephen Harper responds to a question during a closing news conference at the G20 Summit in Cannes, Friday Nov. 4, 2011. (Adrian Wyld/the Canadian Press/Adrian Wyld/The Canadian Press)

Globe Editorial

Canada's economy on a steady course, but isn't invulnerable Add to ...

As Canadians face record household debt, holiday credit-card bills and reminders to keep spending under control, the federal government is being applauded for its fiscal leadership.

A recent report by the International Monetary Fund warned about household debt in Canada, saying the economy is “vulnerable” to the overheated housing market and “adverse macroeconomic shocks.” The IMF also called for a review of the rules of Canada Mortgage and Housing Corporation, calling it “the key backstop to the housing market.” There is reason for concern; CMHC said last month mortgage debt accounts for 68 per cent of household debt.

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The IMF’s analysis of the Canadian economy implies that the Conservatives are on the right fiscal path, while the Liberals waffle about the economy and the NDP pushes for more spending. 

The upcoming spring budget will dominate debate when MPs return to the Hill. Finance Minister Jim Flaherty has signalled it will be an austerity budget. Such belt-tightening is to be commended.

The IMF said the directors of its executive board support the “intention to gradually remove fiscal stimulus and return to fiscal balance over the medium term. They stressed that provincial governments also need to move ahead with fiscal consolidation.” Again, it praised the “exemplary macroeconomic management and financial sector oversight which have enabled Canada to weather the global crisis well” and expressed approval of the Bank of Canada’s monetary policy.

It also stressed the “need for a concerted effort to contain the rising health care costs,” given the aging population. Mr. Flaherty announced recently that the government is slowing the rate of growth in health-care transfers to the provinces to match inflation growth.

The Liberals, meanwhile, have not gained traction on the economy. In an address to the Economic Club of Canada in Toronto in November, their interim leader, Bob Rae, called for long-term infrastructure spending, among other things. His speech, to a sell-out crowd, was criticized for missing the mark on the economy and failing to offer a sound road map, as promised.

As for the NDP, it wants more spending, and at least one leadership candidate, Niki Ashton, is calling for “immediate stimulus.”

At present, the Conservatives’ economic plan is the best route ahead for Canada.

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