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Canada's Magazine for Financing & Leasing Executives

March 21 , 2013

Budget Report & Commentary

Cutting infrastructure spending the wrong choice for Canada, says think tank

OTTAWA--Despite government claims to the contrary, today's federal budget actually reduces infrastructure spending, says the Canadian Centre for Policy Alternatives.

The Building Canada Fund has been reduced to $210 million in 2014-15 from its previous level of $1.25 billion a year and is back-end loaded, with 75% of expenditures to be spent in or after 2020. All other funding for infrastructure in the federal budget is a re-announcement of pre-existing programs.

"The cut in infrastructure spending in today's federal budget goes against prevailing economic wisdom and will only further slow Canada's struggling economy," says David Macdonald, Senior Economist with the CCPA. "This is a major cut for the municipalities that rely on this funding."

"There's never been a better time to take bold action on infrastructure—interest rates are at historic lows, the need for infrastructure investment has never been greater, and the jobs created would be a significant boost to the economy," Macdonald says. "Unfortunately, this budget puts it all off until 2020, instead of right now when we need them most."

According to CCPA estimates, all previous austerity measures in 2014-15 will cut 0.8% from already anaemic real GDP growth of only 1.6% in 2013. Approximately 90,000 positions in the public and private sector will be eliminated due to these measures.

"Canada doesn't have a deficit problem, it has a growth problem—and government austerity is part of the problem, not the solution," says CCPA Senior Economist David Macdonald. "You can't cut your way to growth, particularly on infrastructure."

"While employers are happy to complain about the 'skills gap,' their own job-training programs fall well behind those of other countries. Given this lack of investment, the 'Canada Job Grant' program is unlikely to rectify the situation," says Macdonald. "The requirements are so loose that pre-existing job training will likely qualify and we'll see little or no increase in new workplace training."



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