January 21, 2016 / 7:54 PM / 2 years ago

Canada could pull ahead maintenance spending to boost stimulus

OTTAWA (Reuters) - The Canadian government could pull forward maintenance on essential infrastructure in a bid to provide more rapid support for an economy hit by slumping oil prices, a top official said on Thursday.

Vehicles transport dirt for building oil infrastructure near the Cenovus Energy Christina Lake Steam-Assisted Gravity Drainage (SAGD) project 120 km (74 miles) south of Fort McMurray, Alberta, August 15, 2013. REUTERS/Todd Korol

Infrastructure Minister Amarjeet Sohi said Ottawa was mulling whether to focus on existing projects for two years before starting on a promised 10-year program of new investments. He did not say how much the maintenance could cost.

The Liberals won power last October on the back of a promise to stimulate growth by investing an extra C$60 billion ($42 billion) in infrastructure over a decade.

Since then, though, the economy has slowed further amid crashing oil prices. Bank of Canada Governor Stephen Poloz said on Wednesday the strength of recovery would depend in part on how Ottawa rolled out the stimulus in its budget.

Sohi said the funds for maintenance could be used immediately to repair social housing, rebuild water and wastewater systems and upgrade bus fleets.

“We want to make sure that we get the money out into the community as quickly as possible so we can create jobs and grow our economy,” he told reporters in Toronto.

BMO Capital Markets senior economist Sal Guatieri said the proposal sounded like “a pretty good idea” since it would speed up the rate at which the stimulus kicked in.

“Two or three years from now our economy should be doing a lot better than it’s doing is now. We need the stimulus now, not then,” he said in a phone interview.

“If we want to see a boost to our economy this year that money has to get out of the door pretty quick.”

Earlier, in a speech, Sohi cited a recent Federation of Canadian Municipalities report that said a third of municipal infrastructure ranged between fair and very poor condition.

“If we adopt this two phased approach ... we can fix what we have now instead of delaying and paying more later,” said Sohi.

A senior Liberal this week said the government could push back the budget to April to give policymakers a better idea of the impact low commodity prices are having on the economy. Budgets are usually unveiled in February or March.

($1=$1.43 Canadian)

Reporting by David Ljunggren; Editing by Chizu Nomiyama

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