Parliamentary Budget Officer Kevin Page says tax hikes or deep spending cuts are the only way the federal government's finances can return to a surplus position.
Page is the latest economic expert to suggest Finance Minister Jim Flaherty's plan to eliminate the deficit is unrealistic.
“Based on our analysis, even the analysis we did a few months ago, it will be very difficult to see a surplus within the next five years without significant discretionary actions,” Page said in an interview with Canwest News Service and Global National.
Flaherty, on the other hand, believes the natural growth of tax revenues when the economy returns to normal growth will be enough to clear the deficit.
“As we come out (of recession) and the revenues get better, as they will, as the economy starts to grow, we will be able to work our way out of deficit, into surplus,” Flaherty told reporters before leaving for Italy to attend meetings this weekend of G8 finance ministers.
But Page said the Canadian economy is experiencing “massive structural changes” and, even when the recession ends, growth rates likely will be slower than Flaherty has predicted. Page cites the changes in the auto and forestry sectors as examples.
“It may be that our potential growth rate is lowering, and we need to look at that,” Page said. [Read the rest:]