It’s one that can lead to some uncomfortable decisions and consequences, but also rewards. The transition is still very much a work in progress, the 53-year-old admits.
Morneau calls on businesses to spend more on R&D to keep Canada competitiveBill Morneau sets Canada on path for near-record deficits, growing to more than $29B over next fiscal year
“What I’m really hopeful (for) is that we can focus on things that can make a real difference for the country,” Morneau told the Financial Post during an interview in his Centre Block office.
“That’s what I’ve been spending my time on,” he said. “Of course, it’s a significant change from being in the private sector. But I’m very much enjoying it.”
Morneau has been handed a long to-do list, to be sure — and is enthusiastic for quick action on many policies, cautious in the timing with some others.
Topping that list is a pledge to spend heavily on infrastructure programs for an economy still hurting from the collapse of global oil prices that pushed the country into a recession in the first half of 2015. It’s a promise that has drawn criticism for forcing the budget back into deficits — and big ones at that — after only just getting out of the red created during the 2008-09 recession.
Making a convincing argument for a return to stimulus spending falls to the new finance minister.
Up until late last year, Morneau was little known outside the investment world, but a powerful force within business circles.
A millionaire many times over — and married to a member of the McCain family that owns the New Brunswick-based food company of the same name —Morneau’s decision to enter politics may have seemed like a surprising career move.
But not necessarily to those who know him well.
“He’s very good at understanding what motivates people,” said Bill Robson, president of the C.D. Howe Institute, the Toronto-based think-tank where Morneau was previously a director and board chair.
“He’s very good at figuring out how to get a win-win outcome out of a situation that looks difficult and confrontational. Those are things that stand him in good stead.”
To many Parliamentary watchers, Morneau was a surprise choice for finance minister — one of the most senior portfolios, if not the No. 2 behind the prime minister. Most had expected the role to go to a more seasoned Liberal MP, and worry that the learning curve is too steep for a newcomer.
“He’s so busy learning the ropes of how to be a politician and how to be an MP — and then to have, arguably, the most important file on your shoulders, as well, is asking a lot of a first-time politician,” said Douglas Porter, chief economist at BMO Capital Markets.
“I wonder how much influence he really has, or whether he’s driving the bus or whether it’s coming from somewhere else (regarding) what should be in the budget, what should be the priorities,” Porter added.
Whatever the concerns, Morneau brings a lot of economic savvy to the cabinet table, but probably some corporate baggage, as well.
One issue in particular — reversing the Conservative’s decision to gradually raise the country’s retirement age to 67 from 65 — deserved “at least one intense conversation in cabinet,” said Robson, at the C.D. Howe Institute.
It’s a policy change that many critics argue will put more spending pressure on government resources by having fewer workers actually paying into the Canada Pension Plan.
“I’m not alone in thinking it peculiar that a finance minister with a background in pensions would go along with something like that,” said Robson. “I don’t know if there was a heated conversation behind closed doors. I hope there was.”
But in the big-budget picture, Morneau seems confident that Ottawa is on the right track in its spending programs and the course it’s following to balance the federal books.
“Of course, it’s a significant change from being in the private sector. But I’m very much enjoying it.”
“What they (voters) have seen in our budget are the kinds of measures that we said we were going to make in our campaign (they) are what we did in our budget, ” he told the Financial Post.
“There are slightly more in a couple of places, making those investments in research infrastructure at universities, making those investments in federal infrastructure — those were things that we decided made sense in our economic environment.”
In the run-up to the national vote, the Liberals said they would need to pile up $10-billion deficits in each of the first two years of their mandate. But so far, the red ink for 2016-17 alone has nearly tripled and will continue to flow — but progressively shrink — over the next few years, according to the March 22 federal budget.
“If we’re successful in making the investments, and we intend on being successful, we expect a higher level of (economic) growth. And we do think that gets us on to a very good pace of reducing our net debt to GDP— a pace that will get us back to balance,” Morneau said.
But the government stopped short of saying when it will balance the books.
“That date is aligned with the rate of growth and we’ve made assessments. We have an assessment of what we think will happen and, as it actually happens, we’ll give people more information.”
There is also uncertainty and debate over a possible spending shortfall in the just-completed 2015-16 fiscal year.
Morneau maintains the Conservative government left the Liberals with a $5.4-billion deficit forecast. The Tories counter that the previous year actually ended with a surplus, negating the need for a funding shortfall.
“Here’s what I’m adamant about. We’ve taken a look at the pattern of revenues and expenses over the last number of years. The pattern . . . is that revenues do go down significantly and expenses do go up at the end of the year,” Morneau said.
“And we’ve just taken that pattern and superimposed it on this year to get to our conclusion of what is likely to happen. The results aren’t known yet.”
“What they (voters) have seen in our budget are the kinds of measures that we said we were going to make in our campaign…”
What is known is that the impact of the economic downturn — the first since 2008-09 — has been much worse in resources-dependent provinces like Alberta and Newfoundland and Labrador. The Liberal platform called for infrastructure projects to flow across Canada, to provinces and territories and finally cities and municipalities.
“We made commitments to infrastructure spending, where we’ve taken the first step and we’ve been very clear that we’re going to take a second step this year. I think Canadians would give us more time than five months to figure out how to do that.”
Morneau is adamant that, given the time, the government will get the right economic balance for sustainable growth.
“The issues we’re on now is how do we execute well. How do we make sure that we don’t try to move too fast and not execute well,” he said. “So, we’ll move at the pace that makes sense.”