Feds eye fast infrastructure spend in Alberta: report

Canadian Prime Minister Justin Trudeau has decided to focus initial stimulus efforts in oil-producing Alberta and Saskatchewan, while waiting to assess whether further stimulus is needed nationwide, Bloomberg News reported this week.

The government is in talks to quickly allocate $1 billion for infrastructure projects in the two provinces — money earmarked by the previous government’s infrastructure fund but not yet delivered, two government officials confirmed.

The move is part of a decision to prioritize new infrastructure in the two provinces because the impact of the oil-price shock is strongest there, said government officials who spoke with Bloomberg News on condition of anonymity because budget decisions aren’t yet final.

As the economic outlook deteriorates, the government has been resisting pressure to dramatically change its fiscal plans, worried it would undermine a campaign pledge to be fiscally prudent. Trudeau campaigned in last fall’s federal election on a deficit of no more than $10 billion in his first year, a pledge he and his ministers have since tacitly abandoned. They now say the country’s debt-to-GDP ratio will continue to decline.

“We’re looking very, very hard at what needs to be done,” Trudeau told reporters Monday afternoon. “We’ve always said that being fiscally responsible while creating growth is at the heart of what the Liberal Party is, and that’s exactly what we’re going to do.”

Last week Canadian Imperial Bank of Commerce Chief Economist Avery Shenfeld said a deficit as deep as $30 billion was needed to revive growth, and this week former Bank of Canada Governor David Dodge urged Trudeau to ramp up fiscal stimulus to take the pressure off monetary policy.

Trudeau and his cabinet spent Monday meeting in New Brunswick and emerged with few new details on what, if anything, his government will do to respond to sharp declines in the value of Canada’s currency and the price of oil.

Outside the oil-patch, the federal government is biding its time. It wants to avoid overreacting as it assesses the impact of the falling dollar and determines whether growth will rebound in the manufacturing provinces of Ontario and Quebec, one official said.

Infrastructure Minister Amarjeet Sohi — who represents an Alberta district — said cabinet is considering how to quickly allocate a total of $10 billion in infrastructure cash approved by the previous government. While the federal government typically splits major project costs with provinces and municipalities, Trudeau’s team is considering paying a larger share for projects they deem worthwhile, Sohi said in New Brunswick.

Finance Minister Bill Morneau said Monday morning he was still determining his spending plans but that the government would prioritize infrastructure that boosts “the long-run productive capacity of the country.”

Trudeau’s cabinet retreat concluded Tuesday, when he left with Morneau and others to Davos for the World Economic Forum. Canada’s parliament is due to resume Jan. 25, with a budget typically expected in March.