Tax cuts and fiscal retrenchment wrong roads to follow

Economic outlook calls for more government investment in Manitoba economy
January 13, 2005

Winnipeg— The Manitoba economy performed relatively well in 2004. But there are signs that 2005 will be a lacklustre year. A just released report from the Canadian Centre for Policy Alternatives, The State of the Manitoba Economy, 2004, concludes with a call for an active government to stabilize the economy.

External forces are always a difficulty for Manitoba. The wet, cool weather, the rising value of the Canadian dollar and continuing US harassment of Canadian exports were unkind to the Manitoba economy in 2004. Our growth rate, at about 2.9%, continues to lag behind the national average. Declines in farm income and agriculture exports, coupled with drops in electrical power production and sales are major concerns and key elements of the $568 million trade deficit.

There were signs of economic resilience in 2004. Employment levels were high, unemployment levels were low and provincial outmigration has decreased. Residential construction and consumer spending on housing, which rose 38%, were quite robust in 2004 and were the bright spots of economic activity for the province.

But for 2005, says Fletcher Baragar, author of the report, “the expectation of higher interest rates will ‘cool off’ these leading components.” The high and rising Canadian dollar is also expected to dampen manufacturing and other exports on which Manitoba depends.

Governments need to acknowledge the positive effects they can have on economic performance, added Baragar. Investing in the economy rather than tax cuts seems a more appropriate response to the 2005 economic outlook.

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For more information, call the CCPA-MB office at 927-3200.

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