Chapter 1: Introduction

We see Canada for what it is and what it can be—a great, good nation, on top of the world, the True North strong and free. Our government has been inspired by this vision from the beginning. Today we step forward boldly, to realize it fully—hope for our children and grandchildren; opportunity for all Canadians; a prosperous future for our beloved country.

—The Honourable Jim Flaherty,
Minister of Finance

Canada is emerging from the global economic recession. The economy’s strengths provide an opportunity for the Government to take significant actions today that will fuel the next wave of job creation and position Canada for a secure and prosperous future. Economic Action Plan 2012 sets out a comprehensive agenda to bolster Canada’s fundamental strengths and address the important challenges confronting the economy over the long term.

Canada faces a fast-changing global environment, with increasing competition from emerging market countries and a global economy that remains fragile and uncertain. For this reason, the Government remains focused on an agenda that will deliver high-quality jobs, economic growth and sound public finances. Economic Action Plan 2012 will help further unleash the potential of Canadian businesses and entrepreneurs to innovate and thrive in the modern economy to the benefit of all Canadians for generations to come.

Since 2006, the Government has supported the security and prosperity of Canadians and promoted business and investment to create jobs. When the global financial and economic crisis struck, these underlying strengths helped Canada to avoid a deep and long-lasting recession. The Government’s sound fiscal position prior to the crisis provided the flexibility to launch the stimulus phase of Canada’s Economic Action Plan, which was timely, targeted and temporary in order to have maximum impact. This plan was one of the strongest responses to the global recession among the Group of Seven (G-7) countries.

Economic output in Canada is now well above pre-recession levels, and more than 610,000 jobs have been created since the recovery began in July 2009, the best performance in the G-7.

Canadian authorities have a strong track record in managing past economic and financial crises and delivering economic growth.

— Standard & Poor’s, October 25, 2011

Canada cannot rest on this record of success. There are many challenges and uncertainties still confronting the economy. The recovery is not complete and too many Canadians are still looking for work. The global economy remains fragile and any potential setbacks would have an impact on Canada. Canadian businesses face ever-increasing competition from emerging fast-growth countries. Our aging population will put pressure on public finances and social programs.

Economic Action Plan 2012 takes important steps to address these structural challenges and ensure the sustainability of public finances and social programs for future generations. International experience shows the importance of taking action now, rather than delaying. Economic Action Plan 2012 focuses on the drivers of growth and job creation—innovation, investment, education, skills and communities. Underpinning these actions is the ongoing commitment to keeping taxes low, which is central to the Government’s long-term economic plan.

Supporting Entrepreneurs, Innovators and World-Class Research

The global economy is increasingly competitive. The pace of technological change is creating new opportunities while making older business practices obsolete. To succeed and thrive in this environment, Canadian businesses need to innovate and create high-quality jobs. The Government has a strong record of support for research and development. But Canada can and must do better to promote innovation. The Government launched an Expert Panel in 2010 to review federal support for research and development. Informed by the advice of the Panel, the Government is taking action toward a new approach to supporting innovation in Canada.

Economic Action Plan 2012 will:

• Increase funding for research and development by small and medium-sized companies.
• Promote linkages and collaborations, including funding internships and connecting private sector innovators to procurement opportunities in the federal government.
• Refocus the National Research Council on research that helps Canadian businesses develop innovative products and services.
• Enhance access to venture capital financing by high-growth companies so that they have the capital they need to create jobs and grow.
• Streamline and improve the Scientific Research and Experimental Development tax incentive program, including shifting from indirect tax incentives to more direct support for innovative private sector businesses.
• Support research, education and training with new funding for universities, granting councils and leading research institutions, such as Genome Canada.

Responsible Resource Development

Canada’s resource sector is an asset that will increasingly contribute to the prosperity of all Canadians. Some $500 billion is expected to be invested in over 500 major economic projects across Canada over the next 10 years, driven in part by demand from emerging economies. Today, Canadian businesses in the resource sector must navigate a maze of overlapping and complex regulatory requirements and red tape. This leads to delays in investment and job creation that do not contribute to better environmental outcomes.

An efficient regulatory system provides effective protection of the interests of Canadians while minimizing the burden on businesses. It is a vital component of an attractive climate for investment and jobs. Since 2006, the Government has worked to streamline and improve regulatory processes. However, more needs to be done.

The Government is committed to reforming the regulatory system in the resource sector so that reviews are conducted in a timely and transparent manner, while safeguarding the environment. This will increase business confidence and enhance investment and job creation. The Government will continue to support responsible energy development.

Economic Action Plan 2012 will:

• Commit to bringing forward legislation to achieve the goal of “one project, one review” in a clearly defined time period.
• Make new investments to improve regulatory reviews, streamline the review process for major economic projects, support consultation with Aboriginal peoples, and strengthen pipeline and marine safety.
• Continue to support the Major Projects Management Office initiative, which has succeeded in shortening and streamlining reviews and improving accountability.
• Ensure the safety and security of Canadians and the environment as energy resources are developed.

Expanding Trade and Opening New Markets for Canadian Businesses

Free and open trade has long been a powerful engine for Canada’s economy. Canadian businesses need access to key export markets in order to take advantage of new opportunities. Over the past six years, Canada has concluded free trade agreements with nine countries as well as foreign investment promotion and protection agreements with ten countries. Since 2009, Canada has eliminated all tariffs on imported machinery and equipment and manufacturing inputs to make Canada a tariff-free zone for industrial manufacturers, the first in the G-20 to do so.

Economic Action Plan 2012 will:

• Intensify Canada’s pursuit of new and deeper trading relationships, particularly with large, dynamic and fast-growing economies.
• Implement the Action Plan on Perimeter Security and Economic Competitiveness and the Action Plan on Regulatory Cooperation, which will facilitate trade and investment flows with the United States.
• Provide support to Canadian exporters by extending the provision of domestic financing by Export Development Canada.

Investing in Training, Infrastructure and Opportunity

Canada’s well-trained and highly educated workforce represents one of our key advantages in competing and succeeding in the global economy. Too often, barriers or disincentives discourage workforce participation. Better utilizing Canada’s workforce and making Canada’s labour market more adaptable will help ensure Canada’s long-term economic growth.

Economic Action Plan 2012 will:

• Make investments to assist more young people in gaining tangible skills and experience.
• Extend and expand the ThirdQuarter project to better connect workers over the age of 50 to potential employers.
• Invest to enable more Canadians with disabilities to obtain work experience with small and medium-sized businesses.
• Introduce a number of targeted, common-sense changes to Employment Insurance (EI) to make it a more efficient program that promotes job creation, removes disincentives to work, supports unemployed Canadians and quickly connects people to jobs.
• Support small and medium-sized businesses and their workers by making EI premiums more stable and predictable, with annual increases limited to five cents.
• Extend the Hiring Credit for Small Business for one year to help small businesses to defray the costs of hiring new workers.
• Promote job creation by renewing the Canadian Coast Guard Fleet; supporting the involvement of small and medium-sized enterprises in the National Shipbuilding Procurement Strategy; investing in transportation infrastructure, including railways and ports; and providing funding for community public infrastructure facilities.

Expanding Opportunities for Aboriginal Peoples to Fully Participate in the Economy

The Government recognizes the contribution that Aboriginal peoples can make to the labour force as the youngest and fastest-growing segment of the nation’s population. Equipping First Nations people with the skills and opportunities they need to fully participate in the economy is a priority both for this Government and for First Nations people.

Economic Action Plan 2012 will:

• Invest in First Nations education on reserve, including early literacy programming and other supports and services to First Nations schools and students.
• Build and renovate schools on reserve, providing First Nations youth with better learning environments.
• Commit to introduce a First Nation Education Act and work with willing partners to establish the structures and standards needed to support strong and accountable education systems on reserve.
• Improve the incentives of the on-reserve Income Assistance Program while encouraging those who can work to access training that will improve their prospects for employment.
• Renew the Urban Aboriginal Strategy to improve economic opportunities for Aboriginal peoples living in urban centres.

Building a Fast and Flexible Economic Immigration System

Since 2006, the Government has pursued much-needed reforms to focus Canada’s immigration system on fuelling economic prosperity for Canada. The Government has placed top priority on attracting immigrants who have the skills and experience our economy needs. The Government is committed to making our immigration system truly fast and flexible in a way that will sustain Canada’s economic growth.

Economic Action Plan 2012 will:

• Realign the Temporary Foreign Worker Program to better meet labour market demands.
• Support further improvements to foreign credential recognition and identify the next set of target occupations beyond 2012.
• Move to an increasingly fast and flexible immigration system where priority focus is on meeting Canada’s labour market needs.
• Return applications and fees to certain federal skilled worker applicants who have been waiting for processing to be completed.

Sustainable Social Programs and a Secure Retirement

In order to ensure the sustainability of our social programs and fiscal position for generations to come, steps are required to prepare today for the demographic pressures that the Canadian economy will face over the longer term. Canadians are living longer and healthier lives. Many older workers wish to work longer and increase their retirement income.

The Government has already taken steps to ensure sound public finances by setting a future growth path for transfers to the provinces and territories. The growth path will provide predictable, fair and sustainable funding in support of the provision of health care, education and other services for all Canadians.

Economic Action Plan 2012 will:

• Gradually increase the age of eligibility for Old Age Security (OAS) and Guaranteed Income Supplement benefits from 65 to 67. This change will start in April 2023, with full implementation by January 2029, and will not affect anyone who is 54 years of age or older as of March 31, 2012.
• Improve flexibility and choice by allowing Canadians the option of deferring take-up of their OAS benefits to a later time and receiving higher annual benefits.
• Ensure that pension plans for public servants and Parliamentarians are sustainable, fair and financially responsible.
• Support the retirement income system with Pooled Registered Pension Plans that provide an accessible, large-scale and low-cost pension option to employers, employees and the self-employed.

Responsible Expenditure Management

Canadians expect value for money from their government. Over the past year, the Government conducted a comprehensive review of approximately $75 billion of direct program spending by federal departments and agencies. The review identified a number of opportunities to enhance the efficiency and effectiveness of government operations, programs and services that will result in cost savings for the Canadian taxpayer. This will support the Government’s commitment to return to balanced budgets over the medium term. The Government is on track to meet its commitment to balance the budget without cutting transfers to Canadians or to provinces.

Fiscal policy is appropriately shifting toward consolidation in the aftermath of the effective stimulus program. The federal government is leading the initial fiscal effort, as spending is gradually being brought to pre-crisis levels as a share of GDP.

— International Monetary Fund
November 23, 2011

Reflecting Canada’s strong economic and fiscal fundamentals, Canada will undertake expenditure reductions that are modest compared to those being pursued by many countries around the world. These targeted reductions clearly contrast with the Program Review undertaken in Canada in the mid-1990s, when transfers for health care, education and social spending were cut.

Economic Action Plan 2012 will:

• Achieve ongoing savings of $5.2 billion, 6.9 per cent of the review base of approximately $75 billion. This represents less than 2.0 per cent of expected federal program spending in 2016–17, or about 0.2 per cent of Canada’s gross domestic product (GDP) in that same year.

The Plan to Return to Balanced Budgets

Canadians know the importance of living within their means and expect the Government to do the same. That is why the Government is committed to managing public finances in a sustainable and responsible manner. The Government’s responsible financial management put Canada in a position of strength when it came time to combat the global recession. From 2006 to 2008, the Government paid down over $37 billion in debt, significantly contributing to Canada’s low net debt position. This enabled the Government to quickly implement the stimulus phase of Canada’s Economic Action Plan without leaving the country in a vulnerable fiscal position, like many European countries.

Balancing the budget and reducing debt cuts interest costs, helps to keep interest rates low and instills confidence in Canada’s economy, allowing families and businesses to plan for the future. It will also ensure the sustainability of Canada’s social programs for future generations.

The Government is on track to return to balanced budgets over the medium term

Chart 1.1 Budgetary Balance After Economic Action Plan 2012 Measures

Conclusion

Economic Action Plan 2012 is a plan for jobs, growth and long-term prosperity. By making choices now, the Government is taking the necessary steps to reinforce the fundamental strength and promise of the Canadian economy in order to sustain economic growth, create the high-quality jobs of tomorrow, preserve social programs and sound public finances, and deliver continued prosperity for generations to come.