Finance Minister Joe Oliver likely to stay the course, experts say

Canadians woke up to a new finance minister on Wednesday, but that doesn't mean we should expect any dramatic changes to fiscal policy any time soon.

Joe Oliver’s appointment to the top post was made official when Prime Minister Stephen Harper posted the news to Twitter.

Oliver, 73, takes over from Jim Flaherty, whose sudden departure one day earlier came after eight years on the job. The veteran politician, with his signature green tie, leaves just as the government is on track to post a surplus in 2015, right on time for the federal election scheduled for next fall.

Current expectations are for a surplus of $6.4-billion next year, plus a contingency reserve of $3-billion, building to potential $45 billion within the next few years, according to economists.

Now all eyes are on Oliver, who, until today, served as natural resources minister, and how the Conservatives will choose to spend the money after so many years of fiscal squeeze.

Do we reduce public debt, cut taxes or invest in growth to strengthen the economy?

There’s certainly no shortage of opinion on the topic.

Before Oliver had a chance to hang up his shingle outside his new office, the Canadian Taxpayers Federation issued a media release calling on the new minister to deliver tax relief to Canadian families in the form of a rollback in employment-insurance rates and debt repayment.

“Joe Oliver needs to start paying that debt back right away, so our taxes go to pay for services for Canadians, not interest payments to bond holders overseas,” said Gregory Thomas, the federation’s federal director.

In Ottawa, Glen Hodgson, senior vice-president and chief economist at the Conference Board of Canada, said the time is right to begin shoring up Canada’s growth potential through significant investment in a strengthened labour force, business innovation and updating the country’s aging physical infrastructure, including road and railway networks, ports, and bridges

Canadian economic growth is expected to pick up a bit this year and next, from 2.3 to almost 2.5 per cent annually, but, after 2016, the Conference Board projects the country’s economic engine will slow to 2 per cent annually.

A slower economy, said Hodgson, puts pressure on programs Canadians care about, such as healthcare and education, and narrows our living standards.

“It could mean one less bedroom in your house, or having to go stay with relatives when you go on vacation, let alone having the resources to deal with social change,” he said.

Craig Alexander, senior vice president and chief economist of TD Bank Group, said Canadians shouldn’t be expecting any bold changes to the fiscal policy in the near term.

“It is going to be steady as she goes in 2014,” Alexander said.

The real question is what next year’s budget will look like as Oliver inherits a surplus and looks to strike a delicate balance between promoting growth and prosperity and maintaining core social and economic priorities.

“That means the discussion is going to get a lot more complicated,” he said.

RBC chief economist Craig Wright shared a similar viewpoint, noting, “I’m not sure we expect or even want significant change going forward, but rather a steady hand. We are hoping to see the surplus build over time to support economic growth and productivity.”

Benjamin Reitzes, senior economist with BMO Capital Markets, said Canadians could be in for tax cuts in advance of a federal election, potentially in some form of income splitting.

The Conservative’s pledged in 2011 to implement income splitting for couples with children under 18. The policy was believed to be beneficial for one-income families.

But Flaherty wasn’t sold on the policy, expressing a desire to look instead at alternatives to meet the promised tax cuts.

With less than 24 hours in his new role, Oliver has already committed to keeping the Conservative election promise, saying he will need more time to study the issue before any details are released from the finance department.

“We will have to wait and see what the new finance minister thinks,” Reitzes said.