“Policy makers in Canada have less wiggle room on the fiscal and monetary fronts and households face larger debt burdens,” Toronto-Dominion Bank deputy chief economist Derek Burleton said in a report. “By virtue of its fundamental strengths, many believe that the downturn would be less severe and the economy would recover more quickly than would be the case south of the border. Given Canada’s increased domestic vulnerability, such an outcome would not be guaranteed.”Just in reference to the Flaherty/fiscal side, what Flaherty had to say on Friday at the Finance Committee is reported here, with the numerous positives he cites on Canada's relative economic shape. Flaherty did admit, when pressed, that they might acquiesce to more stimulus spending, i.e., veering from his deficit reduction/austerity course, if conditions were to dramatically deteriorate. This TD report seems to be putting a damper on that latter point.
TD pegged the odds of another U.S. recession at 40 per cent. Should another U.S. downturn occur, Canadian businesses would be in better position this time around because most have less debt and more liquid assets, and because it is “highly unlikely” that a double-dip south of the border would be as deep as the last recession, TD said in its report.
But with governments and households less able to spend, Canada’s economy is more vulnerable to shocks, TD said. That view is at odds with the message Finance Minister Jim Flaherty and Bank of Canada Governor Mark Carney gave last week at a parliamentary panel, when they said Canada and its trading partners would sidestep any recession, and that they have the tools to blunt the impact if they are wrong.
In the interests of noting developing opinion surrounding the government's prevailing economic line.