Canada Dispenses Investment Structure; Opts Faster Economy Growth

By Xyla Joelle L. Fernandez

Oct 08, 2016 06:00 AM EDT

Prime Minister Justin Trudeau said that Canadian government is trying to dispense infrastructure investments into the economy as quickly as possible to spur growth. He also said that the government is monitoring jobs data and other figures. His Liberals came to power last year promising C$60 billion in new infrastructure spending, bringing the total to C$120 billion or $91 billion over all over 10 years.

He said "I think there's always going to be a tension between yes, we want to get this money out the door to help as many people with good jobs as possible, but its not just about creating good jobs in the short term, we have to be confident that they're the right investments for the medium and long term".

The government  unveiled a budget with a shortfall of just C$30 billion for the 2016-17 fiscal year.

Bank of Canada Governor Stephen Poloz said that it could take the economy up to five years to fully readjust the challenges of cheap crude oil (C$1=$0.76)

The new federal government is also proposing a Canadian Infrastructure Bank. The bank would allow cities to borrow at the low rates of interest the federal government pays. The savings from low-interest rates will be an illusion. The federal government pays lenders low interest rates because lenders know that taxpayers are the guarantors of cost overruns.

The benefits from infrastructure can be substantial. But projects also differ dramatically. Governments should ensure that all major infrastructure investments are subject to cost-benefit analyses. But the federal government has already decided how much funding should go into its three priority areas: one-third each for public transit, green and social infrastructure. It's already put its thumb on the scale of the cost-benefit analysis. Rather than a top-down decision of which projects are best, Ottawa should enable a bottom-up plan to let cities identify projects.

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