Flaherty says world economy still growing

OTTAWA - Canada is not immune to financial woes in the United States and Europe, but Finance Minister Jim Flaherty says our economy is on track and will weather the current market volatility well.

He appeared before Parliament's finance committee along with Bank of Canada Governor Mark Carney.

"Last week, we saw extreme swings in global markets ... and Canada is a trading nation, with exports representing about a third of our economic output and the U.S. as our largest trading partner," he said, stressing the global economy is still growing, albeit slowly. "As such, global economic turmoil - in the US and Europe - will inevitably impact our existing trading relationships and our economy."

Sound Fiscal Fundamentals

But, he said, Canada's "fiscal fundamentals" are sound. Indeed, the Canadian economy has actually experienced seven consecutive quarters of growth, and is forecasted to be among the strongest in the G7 for years to come.

So unless things deteriorate "in a dramatic way" in the U.S. and around the world, the federal government will stay the course to eliminate the deficit by 2014/2015.

He beat back opposition calls for more stimulus spending, saying that "is actually the problem in Europe. Too much spending, accumulated deficits. It's exactly what we should not do if we want to maintain the fundamental fiscal health that we have in Canada."

NDP finance critic Peggy Nash didn't buy Flaherty's rosy picture.

"In spite of your reassurances, our economy has been under-performing," she said, adding Canada needs a "counter-cyclical" measure of more government infrastructure spending to boost the economy. "Why wouldn't we take advantage of low interest rates, put Canadians to work, and upgrade our infrastructure in urban transit, get clean water into all First Nations communities, or create a national broadband structure. Why wouldn't we do that now?"

Liberal MP Scott Brison asked if the government even had a plan to act, should some economists' fears come true and the U.S. and Europe plunge back into a recession.

"What if you're wrong and they're right?" he asked.

Flaherty said, if required, the government would obviously move to protect Canadian jobs, businesses and families, but currently he doesn't foresee another recession.

"We would act in a pragmatic way, as we have done successfully previously and recently," he said.

Carney echoed much of Flaherty's message, noting that he, too, foresees slower growth for Europe and the U.S. over the next few years, but growth nonetheless.

He also warned some of the Bank's fears about the European crisis have been realized, which could also reduce demand for Canadian goods for years.

In 2009, the Conservatives introduced some $60 billion in infrastructure spending and other stimulus to battle the global recession.