The Canadian economy is firing on all cylinders and that means households have become more resilient to any new challenges, the country’s finance minister said.
Bill Morneau declined to weigh in on Bank of Canada Governor Stephen Poloz’s hotly anticipated rate decision on Wednesday, expected to be the first increase in seven years, but signaled a confidence in the growth underpinning calls to hike.
“I’m not going to talk about rates, it’s the Bank of Canada’s responsibility,” Morneau, the finance chief in Prime Minister Justin Trudeau’s government, said in a Bloomberg TV interview from the G-20 summit in Hamburg that aired Monday.
“What I do think is that, as the economy does better, that puts people in a better situation to face whatever the challenges — whether it’s a different economic environment, a personal situation or a change in global environment,” he said. “These are all things people are more resilient against when the economy is doing better.”
Canada added 45,300 jobs in June, the seventh consecutive monthly gain and four times as much as economists had predicted, according to data released Friday. Morneau cited that along with robust quarterly growth data as evidence of the economy’s strength, though risks such as a housing correction and persistently sluggish commodity prices continue to warrant caution.
“What we see back in Canada is that the global economies are positive, but the Canadian economy is really firing on all cylinders,” Morneau said.
The real-estate market is starting to level off, in part after measures from Morneau to tighten mortgage rules. The federal moves have so far “been positive,” he said, but housing remains “a risk for Canadian consumers that we know we need to manage.”
Morneau, who presented his second budget earlier this year, is now preparing a fall fiscal update that’s expected to include new policy measures. The strengthening economy is improving the government’s outlook, a potential political windfall for Morneau and Trudeau, who are running annual deficits of nearly C$30 billion ($23.3 billion). While modest globally — the debt-to-GDP ratio is stable — they are a potential electoral problem in a country that has been deficit-averse for a generation, and are three-times the scale the governing Liberal Party campaigned on.
The finance minister nonetheless signaled he won’t be changing tack.
“We’re actually in a very favorable position,” he said, adding that government measures so far are already driving job gains. “The fact our economy is growing and creating jobs, it’s very related to the economic policies we put in place. So we will move forward and continue with that approach.”
Trudeau and Morneau have only recently begun to boast about Canada’s boom. One-time factors, like recovery from a major forest fire last year and the arrival of new government payments to lower-income families, could also be juicing the economy temporarily.
The finance minister said the most important thing for Canadians is that “when the economy goes well, they have more opportunities.” Asked about potential economic changes that arise from stronger growth, he said “you’ve got to take them in stride.”