What`s on Canada`s agenda for 2011: Lower taxes and raise growth to 3%

Charles Kramer, the IMF Mission Chief for Canada, describes some of the good thing that Canada has done to stay free of the economic avalanche of bad news.  Canada didn`t even technically have a recession.

He talks about Canada`s growth prospects going forward and their attention to tax and spending issues.  Most Americans don`t realize that Canadians are taxed much less at the National level, and in most cases lower overall.  They have much lower levels of corporate taxes.  They are looking to grow 3% next year and have a lower public debt and lower household debt than they do in the US.  Via IMF:
There are plans to bring down corporate tax rates over time as part of the fiscal consolidation plan. What we're thinking there is that could be one option and there are a number of others, and obviously you mentioned infrastructure, that could be used to support the economy. But that's really only if we see downside risks materializing so that under the outlook we have now we don't think that would be necessary.

But more generally you mentioned fiscal room. What we mean by that is that Canada by comparison internationally has a very low net debt with a track record of fiscal soundness so that we see some room to respond there again only if the downside risks I've mentioned actually come to the fore.

...Right now we're looking at 3-percent growth or thereabouts for this year and 2-1/4 for next year with growth at a pretty good clip. Again the expansion is maturing so that we'd expect some slowdown from the more rapid rates we saw particularly coming out of the crisis so that we don't see it as necessary to respond now. What we would need to see I think is a substantial deterioration in the outlook, for example, a down-leg in the U.S. expansion, but that's not something we're expecting now.

I think at this point what we're seeing is again household debt has come up a lot relative to disposable income so that the figure we flag in the report is about 143 percent of disposable income and that's high. It's a little bit below where it's ranging in the U.S. In the U.S. it's about 149 percent of disposable income but still at a pretty high level. I think what I'd highlight there is the fact that again the Canadian financial system has continued to function quite well through the crisis so that we've seen consumer lending and household lending continuing to expand.


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