Harper speaks: The recession and the challenges of power

Stephen Harper believes the recession is easing but warns that when economic recovery finally begins he expects it to be gradual.

In his first interview with The Globe and Mail since his re-election last October, Mr. Harper discussed the difficulties of governing during turbulent global economic times.

Speaking as the G8 meeting in Italy came to an end, he said that "predictions have been evolving so rapidly that I think we have to be prepared to accept the fact that predictions may change, again."

Reviewing the economic performance over the past few months, Mr. Harper suggested the worst is behind us: "… the economy is not as bad as it was three or four months ago. I think that's important to say. The signs of the easing of the recession … are pretty clear. At the same time I think the current judgment is the prospects of a rapid recovery are less certain. It would look like recovery may be somewhat slower."

But the government is prepared to let the deficit remain past fiscal year 2013-14 if the recovery is slow. Mr. Harper reiterated there will be no tax increases.

"We will allow the deficit to persist if necessary," he said. "…We will not be raising the GST, or any other tax, during or after the recession."

The caution enunciated by Mr. Harper was reinforced when he spoke about the months ahead, specifically next year when Canada hosts both the Olympics and the next G8 meeting.

"… certainly the wide consensus is that the first quarter of this year was the worst of economic performance, and it should be better from here.

"The question will be, how much better? And, you know, will it be a slower recession, a levelling off, a mild recovery, or a more aggressive recovery? You know, right now I think the balance of opinion toward 2010 is a mild recovery."

Read the full transcript of Prime Minister Stephen Harper's conversation with The Globe and Mail

In his interview with The Globe, Mr. Harper again defended his decision to reduce the GST, saying it was "good policy." And he hinted that he would also continue to look at reducing corporate tax rates in an attempt to help businesses.

"… we have a big opportunity to come out with a relatively much better tax burden than other countries."

Friday, the Prime Minister called on countries with surpluses to begin stimulating their own economies rather than relying on the United States, whose consumers are tapped out and are not expected to ever return to the low savings rates of the past.

"We have had a system of global imbalances where the American consumer was sustaining global growth on the basis of unsustainable consumption," he said. "Countries that are in massive surplus have to start increasing their domestic demand."

Asked in the interview which industries give him the most concern, Mr. Harper said he expects continued difficulties in forestry, autos and manufacturing.

"I think these areas will continue to be under pressure because the job losses are not entirely recessionary," he said. "It involved a restructuring of the economy and that's why … we're putting money into unemployment insurance."

Climate change was another major topic at the G8 meeting and Mr. Harper said he is determined to set realistic, attainable goals, even with oil sands expansion continuing. He said his government will keep its word.

"A realistic commitment is consistent with growth in the oil sands. Oil sands growth is not the only source of our carbon dioxide emissions, or even the growth of our emissions. But obviously, addressing some of the issues in the oil sands are going to have to be part of the solution."

The summit's main topic of business on its wrap-up day was a meeting between the G8 and African leaders. G8 leaders said they want to provide $20-billion (U.S.) in aid over the next few years to increase food production in developing countries, an increase of $5-billion (U.S.) from their original projection.

In a separate statement, leaders said it was also important to increase access to water and sanitation.

On efforts to increase aid, Mr. Harper warned that any new commitments made by G8 countries need to be followed through, lest wealthy nations lose their credibility. Countries that don't will face "increasing heat."

Mr. Harper said his government has lived up to its promises for aid to Africa, which four years ago called for a doubling. "[When]we make demands of them, as we do, whether its demands on economic performance, or governance or human rights, our ability to make those demands is undercut when we fail to move forward on our own commitments."

Aid groups attending this year's conference agreed that Canada had met its obligations, but they pointed to the modest goals that had been set.