Forestry aid won't deepen deficit: Flaherty

Wed Jun 17, 2009 5:03pm EDT
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OTTAWA (Reuters) - A C$1 billion ($880 million) aid package for Canada's pulp and paper producers will not inflate the federal government's deficit further because it has already been built into the budget, Finance Minister Jim Flaherty said on Wednesday.

"It won't affect the fiscal outlook. It's built into our fiscal outlook in terms of what we're going to do in the forestry industry in Canada, and it's spread out over time, so I can deal with it," Flaherty told reporters.

Last week, the government said the country would run a C$50.2 billion ($44.4 billion) budget deficit this fiscal year, as it pumps billions of dollars into the auto sector and helps fund infrastructure projects designed to spur economic growth.

The C$50.2 billion deficit was well above the C$33.7 billion deficit predicted in January's federal budget.

Earlier on Wednesday, Ottawa announced a C$1 billion lifeline for pulp and paper producers, who complain they are drowning financially because of a tax windfall benefiting their American rivals.

Flaherty also said Canada's economy is "looking quite good in the eyes of private forecasters", citing two major banks that have forecast economic growth of 2.5 percent next year.

He said an overhaul of financial regulation like the one in the United States laid out by President Barack Obama on Wednesday was not needed in Canada.

"They are taking some regulatory steps that we don't need to take in Canada because we're already there," Flaherty said.

The one gap in Canada is securities regulation, which is done by provinces, he said.   Continued...

<p>Finance Minister Jim Flaherty waits to testify before the Commons finance committee on Parliament Hill in Ottawa June 16, 2009. REUTERS/Chris Wattie</p>