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Canada unveils austerity budget

Ottawa - Canada's Conservative government called for the retirement age to be raised and for major public service cuts Thursday, in an austerity budget that aims to balance the books by 2016.

Tackling unpopular measures that many industrialized countries are being forced to consider as their populations age, the Ottawa said its budget would help the country move a step ahead.

"Other Western countries face the risk of long-term economic decline. We have a rare opportunity to position our country for sustainable, long-term growth," Finance Minister Jim Flaherty said in the House of Commons.

"Looking ahead, Canadians have every reason to be confident," he said presenting what was dubbed a budget for "the next generation."

Under the plan, Canada will cut its deficit this year through "moderate" spending cuts, as the economy grows by 2.1%, Flaherty said.

But much deeper cuts, including layoffs of 19 200 government staff, or 4.8% of the federal workforce, are planned for the coming years.

Flaherty said old age security and guaranteed income supplement benefits worth up to a total of Can$15 000 annually and now paid out at age 65 would be offered only at age 67, starting in 2023.

He also announced the withdrawal of the Canadian penny from circulation later this year, saying it costs more to produce than its face value. The move will save the government Can$11m per year.

The deficit was projected in the budget to fall to Can$21.1bn or 1.2% of the gross domestic product (GDP) for the year ending March 31, 2013, down from a revised Can$24.9bn last fiscal year.

Flaherty said, "The savings we have identified are moderate," amounting to only Can$1.5bn across all government ministries this year.

The plan was panned by the opposition social democrats, whose leader Thomas Mulcair said: "In the long term, the conditions of these Conservative policies will leave the greatest economic, ecological and social debt in our history in the backpacks of future generations."

Seniors, Inuit, environmental and aid groups, as well as several unions also decried the proposed budget. And several people interrupted Flaherty's speech in parliament, shouting their opposition to the cuts from the gallery.

While Canada's economy weathered the worst of the global economic crisis well, it has not been immune to the tumult that has circled the globe, particularly when it comes to public finances.

Ottawa's debt-to-GDP ratio remains the lowest in the Group of Seven industrialised nations. Canada is one of only two G7 nations to have recouped all the jobs lost during the global recession, Flaherty noted.

According to Statistics Canada, the Canadian economy has created more than 610 000 jobs since mid-2009, but employment was flat in the first two months of this year.

Going forward, the Canadian economy is forecast to grow by a modest 2.4% annually, from 2013 to 2015.

Looking to the longer term, the minister outlined immigration reforms to attract more foreigners with skills and money to "strengthen Canada's economy," and a streamlining of the review process for major resource projects.

He said Ottawa would post more government documents online to reduce its printing costs and ask bureaucrats to hold more videoconferences to cut expenses for travel across the world's largest country by land mass.

About Can$5.2bn was earmarked to renew Canada's aging coast guard fleet, and a small business hiring tax credit was extended to spur private sector job creation.

Flaherty also said the government would step up efforts to diversify Canada's export markets.

The United States is currently Canada's largest trading partner, but Washington's recent rejection of an oil pipeline from the Alberta oil sands to refineries in Texas and ports on the US Gulf Coast strained the relationship.

Since 2006, Canada has signed nine free trade deals and is now negotiating pacts with the European Union and India, as well as trying to grow its trade ties with China.

Prime Minister Stephen Harper during a trip this week launched free trade negotiations with Thailand and Japan.

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