Manufacturers say budget comes up short

By Robert Melnbardis

OTTAWA (Reuters) - Canada's budget offered some financial help for the country's struggling manufacturing sector on Tuesday, but industry groups said it would not be enough to offset the impact of a strong domestic currency, a slumping U.S. economy and low-cost global competition.

Introducing his 2008-09 budget, Canadian Finance Minister Jim Flaherty said he would devote C$250 million ($255 million) over five years to research and development by the automotive sector.

He will also extend a plan under which manufacturers can accelerate the way they deduct for tax purposes the cost of a capital asset.

Flaherty's extension of the already two-year-old temporary plan for a 50 percent, straight-line accelerated capital cost allowance (CCA) is aimed as an incentive for firms to invest in new equipment.

"This will provide the manufacturing and processing sector with an additional C$1 billion in tax relief," he said in his budget speech to the House of Commons.

Industry groups, however, said the one-year extension of the 50 percent rate would not give capital-intensive industries the time and funds needed to plan and execute the big investments they need to compete internationally.

"It's really a grab bag of goodies, some loose pocket change being thrown to the manufacturers," Jayson Meyers, president of the Canadian Manufacturers and Exporters Association, told Reuters.

STRUGGLING AUTO SECTOR