Canadian Monetary and Fiscal Policies - Essay Example

? Canadian Monetary and Fiscal Policies The present economic of Canada is indeed a confirmation of the very fact that the government has been trying to launch the country into high economic realms and catapult the process of economic development. Indeed, much success has always been realized in the context of Canadian economic development to the extent that one is left to wonder about the policies in place and the various measures the government has put into place to ensure the country sails through these turbulent economic times. Despite the challenges that have characterized the West in the recent past, the last two years have not really been a sad affair for Canada. Despite the economic recession that affected most countries across the world, the recovery process in the case of Canada has rather been a positive affair often realized from the economic trend in the country. In these post recession days, Canada has evidenced the highest economic growth rates in the G-7 economic block. Presently, Canada’s fiscal position is certainly the strongest amongst the G-7 countries and this helps to confirm the proper economic policies of the Canadian government in the recent past. The focus of the government in this regard is to ensure that the country remains attractive and economically stable for the purposes of investment and economic realization. The government’s Economic Action Plan, Budget 2011 was designed in a way to enhance and promote the financial strength of the families in Canada, to create a competitive tax system that attracts investment, to promote innovation and to bond the emerging trade relations between Canada and other countries. In any case, it has been realized that most of these policies have actually been realized in the process of economic recovery and the evidence relates to the fact that the country ranks the top in several economic respects across the world. Through the Economic Action Plan, the government has instituted various policies ad measures that have greatly benefited the country and continue to create positive economic impact on the face of the country. Through the plan, the government is committed to encourage the growth of skilled workforce in the economy through apprenticeships and skilled trades which are indeed churning out thousands of skilled works into the Canadian economy. Presently, the government invests over $40 million annually towards the new Apprenticeship Competition Grant (ACG) (Pasma 2012). This is in addition to the Apprenticeship Incentive Grant (AIG) which has been in existence for several years. Through these programs, it is realized that over 20,000 apprentices are rolled into the economy and get certified after the required period. The Canadian economic success has over the last two years largely depended on the country’s ability to export goods to other countries. While most countries in the West are trying to re-strategize and recover from the detrimental effects of the economic recession, the government of Canada’s main preoccupation has always been the need to create the positive and favorable economic climate in order to enhance and improve the balance of trade for the country. In this respect, Canada has an advantage over the rest of the countries owing to the various policies that have always existed and have greatly been advocated by the government in the last two years. For instance, the Canadian financial system is certainly the strongest in the world. The institutions and household in Canada are also some of the financially stable units in the industrialized world. All these positivities are basically a consequence of the economic orientation which the Canadian government has always pushed for over the decades. Upon the realization of the critical effects of the financial meltdown, the government was at the forefront in enhancing its fiscal measures so as to boost the growth of the economy and create a stronger economy that can easily withstand the strong waves of the economic recession. Much of these negative effects were mainly mitigated by the fact that the housing and lending sectors in Canada basically evaded the excesses that occurred in such countries as the United Kingdom and the United States. In any case, the fiscal position of the country remains strong and solid. Through such a solid economic bedrock, the country has effectively managed to steer itself amid the challenges that have governed the world. That financial stability is realized in Canadian economic units is an open fact evidenced from the financial position realized in the country. Much of this strength is basically a result of the government’s strong efforts to enhance access to financing so that consumers, businesses and households were basically safe in financial respects. As a consequence of the global economic recession, most developed countries experienced a reduction in their GDP by over 7.5 percent in the last quarters of 2008(OECD 2011). However in the Canadian case, the highest decline realized from the economic recession was 5.4 percent which was realized at the peak of the recession. Given its situation as a net exporter of manufactured goods, the country was much safe from the effects of the recession and was not weakened from the commodity prices like its neighbor the United States. A balanced budget becomes necessary in a bid to enhance productivity and realize positive economic growth. Over the last two years, the country has greatly managed to reduce the cost of government through the elimination of unnecessary programs and expenses and the introduction of various legislations to bring stability into the federal public sector wages which were always a source of chaos. Tax reductions and increased spending on infrastructure had the effect of increasing the money supply in the economy which consequently triggered economic growth. In the fiscal year 2010/11, tax deductions were estimated to amount to $31 million which actually influenced the level of economic activity in the country though the empowerment of the households (Theodore 2011). The success of these policies is certainly realized in the manner the country has managed to forge ahead amid the challenges evidenced in the present economic world order. Without doubt, it is even estimated that this trend is bound to continue in the coming years since the government is fast-tracking its programs to improve the economic performance of the country. In the last two years, the month of May in 2011 experienced the lowest unemployment rates ever realized in the recent history of Canada. This decline in unemployment is basically as a result of the self employed Canadians who have basically pushed the country’s unemployment rates down. The self employment programs have greatly been boosted through the Economic Action Plan that has seen many skilled workers churned into the job market in order to serve the country. Statistics from the Labor Force Survey indicate that 20,000 new jobs have continuously been created monthly throughout much of the last two years. The government is greatly encouraging the growth of the informal sector in a bid to absorb the many qualified job seekers who cannot find opportunities in the formal sector. Despite the unemployment levels, many people are indeed embracing the government call for self employment and are taking part in the many programs that get unveiled frequently to boost self sustainability. In the last two years the Canadian Economic Action Plan has allocated over $12 billion as funding for the development of new infrastructure in the country so as to boost investment opportunities in the country (Thompson 2011). This decision was a great effort in order to emerge from the economic downturn and create more jobs and opportunities for the country. With a greener infrastructure across the country, much success was envisioned in terms of foreign direct investment and the growth of local opportunities. Much of these infrastructure programs have actually been realized and the country can proudly claim to own a much upgraded infrastructural system that has encouraged the development of many sectors of the economy. Over the last two years the fiscal measures of the government have always been geared towards budget initiatives and measures to stimulate liquidity in the country. The government has been providing incentives and encouraging the Canadian manufacturers to invest in equipment and machinery. Such investments have improved the productivity of the country and have enabled Canada to be a net exporter of manufactured goods in the last two years. This has been happening even as some of the Western countries continue to battle with challenges evidenced as a consequence of the economic recession realized in the world in the recent past. As a measure of the Canadian fiscal and monetary policies over the last two years, the inflation rate in Canada has been stable at a rate of 1.90 percent which puts the country at a very attractive position in terms of the purchasing power of the consumers (2012). In the same vein, the 1.00 percent interest rates evidenced throughout most of that period greatly contributes to the flood of investment opportunities that have inundated the country. As seen from the growth in the GDP, the focus of the fiscal and monetary measures of the Canadian authorities is normally to enhance stability and improve the state of the economy relative to the existing economic situations in the world. Much of these strategies have indeed bore much fruits in Canada and the country can claim a sense of success from the fiscal and monetary policies at play in the Canadian economic system. Like in the case of the last two years, the government is presently focusing on ambitious projects aimed at enhancing free trade and creating financial stability in the country. The Bank of Canada has been very vigilant in regulating the financial sector in the country to ensure that the commercial banks do not influence the prevailing interest rates in the market. In determining the base lending rate in the country, the country adopted an effective policy that positioned the interest rate at 1.00 percent which has greatly improved the investment opportunities in the country. The monetary policies of the bank have further been geared towards selective credit control measures. In this regard, only the fundamental areas of the government receive funding. Some government programs are thereby sidelined as long as they do not directly contribute to the present need for economic realization. In this regard, the Bank has effectively managed to control the amount of money circulating in the economy which subsequently improves the position of the economy with respect to inflation and employment. The stability in the prices of commodities has always been a consequence of the Bank’s measures which are intended to stimulate economic activity through infrastructural development and investment opportunities. In this regard, the availability of investment opportunities coupled with the peaceful and stable environment created by the government have certainly been the right ingredients for the realization of economic success in Canada. In 2011, the government instituted fiscal rules and measures like high infrastructural spending and the tax breaks which assisted in achieving budgetary consolidation and limiting fiscal deficits in the budget. While the focus of the government strongly remains the restraint of expenditure, much focus is also channeled toward the need to maintain a balanced budget for the Canadian economy and thereby enjoy the success factors that come with such situations. In most cases, the government of Canada has always realized its objectives with regard to the measures it puts into place to enhance economic stability and the welfare of the masses. In conclusion, it is realized that the monetary policies exercised by the Bank of Canada and the fiscal policies practiced by the government of Canada over the last two years have greatly positioned the country at a very favorable economic position in the world. While most countries are battling with challenges of inflation and unemployment, the case in Canada is rather mild with respect to these fundamental parameters. It is therefore realized that the country has managed to pull through the effects of the economic meltdown without much struggle as realized from most of the developed countries. Without doubt, a continuation of the application of these policies will indeed create a very favorable position for the country in terms of growth and opportunities. References TradingEconomics.com - Economic Data for 196 Countries. (n.d.). TradingEconomics.com - Economic Data for 196 Countries. Retrieved April 25, 2012, from http://tradingeconomics.com/ Pasma, C. (2012). Bearing the brunt how the 2008-2009 recession created poverty for Canadian families. Ottawa, Ont.: Citizens for Public Justice. Publishing, O. (2011). OECD Economic Surveys. Paris: Organization for Economic Co-operation and Development. Theodore, K. (2011). Privatization: conditions for success and fiscal policy implications. Toronto: McGraw-Hill/Irwin. Thompson, W. C. (2011). Canada 2011 (27th ed.). Lanham, MD: Stryker Post Publications. Read More