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The Globe and Mail

Balancing the books Job One for Harper's team, executives say

Prime Minister Stephen Harper

Sean Kilpatrick

With the U.S. economy staggering to maintain its momentum, and the federal deficit in Canada at stubbornly high levels, Canadian executives say it is crucial that the majority Conservative government use its new powers to clean up the country's finances.

According to the latest C-Suite survey of corporate executives, balancing the federal books should be Job One for Prime Minister Stephen Harper and his colleagues.

Indeed, 84 per cent of the executives surveyed in late May and early June say reducing the deficit to zero should be a high priority in Ottawa, outpacing all other considerations.

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"I strongly feel that Canada's priority, and therefore our government's priority, needs to be balancing our budget," said Chad Ulansky, chief executive officer of Metalex Ventures Ltd., a diamond exploration firm based in Kelowna, B.C. "We need to pay off the money that our country owes."

"Fiscal responsibility begins at the top," said Bill Hammond, CEO of Hammond Power Solutions Inc., a Guelph, Ont.-based manufacturer of transformers. "We've seen what problems a poor fiscal situation can bring, in the United States and Europe. We need to put our house in order, which will better prepare us to handle some of the curve balls that might come at us this decade."

With a majority government in power, there is no excuse for lack of action, he said. "Essentially [the government]can do anything they want, assuming they do have an aggressive plan to reduce costs."

But, like a business in trouble, Ottawa needs to do more than just cut costs, Mr. Hammond said. It needs to increase revenues as well, and he would support a move to boost the GST back to the level it was at before the Conservatives chopped a total of two percentage points off the levy with cuts in 2006 and 2008.

Executives express support for a wide range of other federal policy initiatives, some of which could help decrease the cost of government.

Three quarters of those surveyed said Ottawa needs to tackle the increased cost of public health care as a top priority, while two-thirds want the government to cut the regulatory burden on business. More than 60 per cent say the government needs to address labour shortages - a particular priority for resource firms based in Western Canada.

Fewer than half, however, said cutting corporate taxes further should be a high priority.

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Most executives are still optimistic about the Canadian economy, with more than 90 per cent projecting moderate growth in the coming year. Worries over the U.S. economy are intensifying, however, with more than a quarter expecting a decline there over the next twelve months.

"The U.S. scares me," Mr. Ulansky said. "I'm concerned about the level of debt that exists [there]

However, when it comes to the Canadian economy, "I'm optimistic," he said, though "that is hedged with a fair degree of concern about what is going to happen south of the border, and in Europe for that matter."

Mr. Ulansky noted, however, that while the U.S. is still the dominant economy in the world and a key trading partner for Canada, it isn't as important in the global scene as it once was.

This view was also reflected in the survey results, which showed a greater proportion of executives - 58 per cent - feel it should be a high priority for the new federal government to increase economic ties with Asia, compared with 53 per cent who said strengthening ties with the United States should be a high priority.

The survey, conducted for Report on Business and Business News Network by Toronto research firm Gandalf Group, also showed that environmental issues have slipped from top of mind among Canada's executives. Only about 34 per cent of those surveyed said clarifying greenhouse gas emissions rules should be a high priority for the new government.

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About 50 per cent would support a cap and trade system to manage carbon dioxide emissions, while 42 per cent said a carbon tax was a good idea. Four years ago, when similar questions were asked in a C-Suite survey, 63 per cent supported a carbon tax and 57 per liked cap and trade.

And while 60 per cent of executives say that Canadian business needs the certainty of a regulatory framework on climate change, two-thirds say that can't be put in place until there is clarity around U.S. environmental policy.

Mark Montemurro, CEO of Calgary energy-from-waste company Alter NRG Corp., said he thinks the enthusiasm for environmental initiatives has waned because similar action has not been taken in other countries, particularly the United States.

"With the [U.S.]not adopting those, we as a country would put ourselves at a disadvantage [if we did so]" he said. "For us to take the high road would ultimately hurt our economy."

Mr. Montemurro said the environmental policy he would most like to see most is a flow-through tax credit to support early stage commercial alternative energy projects.

Executives were about equally enthusiastic about major new investments in nuclear power plants - about two-thirds said they support that initiative - as they were about major investments in wind and solar power.

About one-third of executives say they support some restrictions on the growth of Alberta's oil sands.

154 executives interviewed

The quarterly C-suite survey was conducted for Report on Business and Business News Network by the Gandalf Group and sponsored by KPMG.

The survey interviewed 154 executives between May 24 and June 9, 2011. Respondents represent ROB 1,000 companies from across Canada in the manufacturing, service and resource sectors. The margin of error is 7.4 per cent, 19 times out of 20.

Each quarter, a $1,000 charitable contribution is made on behalf of a survey participant. For the March survey, a donation was made to the Stand Foundation on behalf of Robert McLeod, vice-president of Full Metal Minerals Ltd.

Want to know more about what the country's business leaders think? Join Michael Hainsworth Monday night on BNN for the C-Suite Survey at 8:30 p.m. ET.

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