The Budget Plan 2009
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©Her Majesty the Queen in Right of Canada (2009) All rights reserved All requests for permission to reproduce this document or any part thereof shall be addressed to Public Works and Government Services Canada. Available through your local bookseller or by mail from Publishing and Depository Services Public Works and Government Services Canada Ottawa, Ontario KIA OS5 Telephone: 613-941-5995 Orders only: 1-800-635-7943 (Canada and U.S.A.) Fax: 613-954-5779 or 1-800-565-7757 (Canada and U.S.A.) Internet: http://publications.gc.ca Cat. No.: F1-23/2009-3E ISBN 978-0-660-19853-8 This document is also available on the Internet at www.fin.gc.ca Cette publication est aussi disponible en français. Table of Contents 1 Introduction and Overview .......................................................... 7 Introduction ................................................................................... 9 Highlights ...................................................................................... 14 2 Recent Economic Developments and Prospects........................... 31 Highlights ...................................................................................... 32 Introduction ................................................................................... 33 Global Economic Developments and Outlook................................. 33 Private Sector Canadian Outlook..................................................... 56 Risk Assessment and Planning Assumptions..................................... 62 3 Canada’s Economic Action Plan................................................... 65 Overview ........................................................................................ 67 Improving Access to Financing and Strengthening Canada’s Financial System ...................................................... 73 Highlights................................................................................... 74 Introduction ............................................................................... 77 Ensuring Canadians’ Access to Financing— The Extraordinary Financing Framework................................... 78 Further Safeguards for Financial Stability..................................... 85 A New Canadian Securities Regulator.......................................... 87 New Measures to Help Consumers of Financial Products ............ 89 Federally Regulated Private Pension Plans ................................... 90 Other Measures to Strengthen Canada’s Financial System........................................................................ 91 3 Action to Help Canadians and Stimulate Spending.......................................................... 93 Highlights................................................................................... 94 The Canada Skills and Transition Strategy ................................................................... 97 Further Developing a Highly Skilled Workforce ...................................................................... 106 Strengthening Partnerships With Aboriginal Canadians........................................................ 107 Tax Relief for Canadians.............................................................. 109 A Balanced Record of Tax Relief ................................................. 118 Action to Stimulate Housing Construction............................. 123 Highlights................................................................................... 124 Introduction ............................................................................... 127 Support for Home Ownership and the Housing Sector............................................................. 127 Investments in Housing for Canadians ............................................................................ 132 Helping Municipalities Build Stronger Communities..................................................... 135 Immediate Action to Build Infrastructure............................... 137 Highlights................................................................................... 138 Introduction ............................................................................... 141 Investments in Provincial, Territorial and Municipal Infrastructure Projects ....................................... 142 Investments in First Nations Infrastructure.................................. 147 Investments in Knowledge Infrastructure .................................... 148 Investments in Federal Infrastructure Projects ............................. 153 4 Action to Support Businesses and Communities.................................................................... 161 Highlights................................................................................... 162 Introduction ............................................................................... 166 A Business Tax Advantage for Long-Term Prosperity ......................................................... 166 Capital Cost Allowance ............................................................... 167 Tariff Relief on Machinery and Equipment.................................. 169 Sectoral Competitiveness............................................................. 169 Long-Term Competitiveness for Canadian Industry .................... 178 A More Sustainable Environment................................................ 179 Supporting Small Businesses........................................................ 181 Helping All Regions Prosper ....................................................... 182 Partnership with Provinces and Territories ............................. 187 Ensuring Fairness in Transfers ..................................................... 189 Advantage Canada: Progress Toward a More Competitive Canada ................................................... 193 Introduction ............................................................................... 195 Implementing Advantage Canada: Significant Progress to Date ...................................................... 195 Deepening Canada’s Five Advantages.......................................... 196 4 Fiscal Outlook............................................................................... 201 Highlights ...................................................................................... 202 Approach to Budget Planning ........................................................ 204 Fiscal Planning Framework.............................................................. 205 Strong Expenditure Management.................................................... 209 Risks to the Fiscal Projections ......................................................... 230 5 Annexes 1 Economic Action Plan: Employment and Output Impacts ........... 235 2 A Strong Record of Tax Relief..................................................... 251 3 Responsible Spending ................................................................. 265 4 Debt Management Strategy 2009–2010...................................... 279 5 Tax Measures: Supplementary Information and Notices of Ways and Means Motions .......................................................... 299 6 Chapter 1 INTRODUCTION AND OVERVIEW Budget 2009— Canada’s Economic Action Plan Introduction The world is passing through an extraordinary time. Canadians share in the global consensus that extraordinary times call for extraordinary measures. Budget 2009 will help Canada to meet the challenges of our times. It aims to protect our country from an immediate economic threat while providing the solutions we need to secure our long-term growth and prosperity. Canadians in all regions have begun to feel the effects of the deepening global economic crisis. They worry about their jobs, their hard-earned savings and their homes. They are concerned about their families, their businesses and their communities. Fulfilling Canada’s G20 Commitment Canada is not acting alone but in full cooperation and coordination with other industrialized countries. The world economy is highly globalized. It is only by acting together to boost global economic growth that countries can derive maximum impact from their actions. The Government’s actions in this budget fulfill Canada’s commitments at the recent G20 leaders’ summit to provide timely stimulus to domestic demand, while maintaining long-run fiscal sustainability. The International Monetary Fund has suggested that countries in a position to do so should inject fiscal stimulus of 2 per cent of gross domestic product (GDP) to reduce the effects of a damaging global recession. Canada must join this effort. It is now clear that Canada has entered a recession. We entered it later than other G7 countries, and it is shallower here than elsewhere. Budget 2009 not only will help Canadians affected by the current crisis but also position Canada to emerge from this recession in a stronger position. 9 Chapter 1 Consulting with Canadians The Government has listened to the concerns of Canadians. In putting together Budget 2009, it has undertaken an unprecedented consultative effort. It has consulted the provinces and territories. It has considered the views of private sector economists, academics, business leaders and thousands of Canadians who participated in on-line consultations. The Minister of Finance also sought advice from his Economic Advisory Council and Members of Parliament from all parties. Budget 2009 is a reflection of this extensive effort. Budget 2009 reflects a strong consensus among Canadians that the Government