The danger of the world economy and how Canada can protect itself

Having just returned from long trips to Israel and Australia this past month, it was fitting that last week I was asked to deliver a talk at the “Big Thinking Lecture” in Ottawa on the state of the global economy and where Canada stands in the grand scheme of things.

As I said then, in a nutshell, Canada is in relatively good economic shape with somewhat plodding growth, an improved employment picture, low inflation and a strong balance sheet.

But the Canadian economy is still at risk thanks to global threats from Europe and the U.S. We need to be cognizant of these threats and protect ourselves using appropriate fiscal measures.

Here are the three recommendations I offered during last week’s talk:

1. Government should focus on spending priorities that encourage growth, which means investing in the areas of education, research and infrastructure.
2. Canada needs to reform public programs and regulations. This includes reviewing the effectiveness of business and green energy subsidies, and taking a hard look at Canada’s health care system.
3. Tax reform – The tax system is becoming riddled with special tax preferences and narrow bases and the GST requires a major overhaul. Now may be the right time for the federal government to introduce another tax reform, similar to that done by the Technical Committee on Business Taxation in 1997. A new study could focus on personal taxes on incomes, payroll and consumption, all with the goal of making Canada a more competitive country in a troubled international time.