Stephen Poloz backs Justin Trudeau’s deficit plans

Bank of Canada Governor Stephen Poloz said the government can afford huge deficits to help a frail economy, and is set to run a deficit of $29.4 billion in the current fiscal year as it empties cash into infrastructure and a tax credit for families.

Poloz said in an interview broadcasted on Sunday that Canada should not be worried over running up deficits and that investing in infrastructure should help boost companies’ growth, which will help government revenue.
“There is a balance somewhere but I can tell you that I think we’re pretty far away from that balance point,” Poloz said in an interview with Global’s The West Block with Tom Clark.

“Now you’re right, there is a balance point in all this but Canada is in a very good fiscal situation so we shouldn’t be worrying about that at this time,” he said.

“In the case of a targeted investment by government which is identified in such a way that it will be growth enabling, it’s very likely to pay off very well,” he said. “That is, it creates more economic growth for all those that use that infrastructure and that, of course, creates tax revenues and the system keeps turning.”

He also said leveraging up infrastructure spending using private money, primarily from pension funds, is “a very good plan.”

Finance Minister Bill Morneau requires the government to use its money to draw in private investors to infrastructural projects.

Poloz on Oct. 19 said he considered cutting interest rates and check whether business economy would lift after the U.S. decision which is holding back business investment. He also said Canada’s potential growth rate is around 1.5 percent now, and government-funded projects can lift growth.