OTTAWA - Finance Minister Jim Flaherty is suggesting the federal government may be willing to provide additional economic stimulus to inject life into Canada's dormant economy -- and he's urging the provinces to consider following suit.
The proposal to speed up government spending to boost the economy will be discussed at Monday's first ministers meeting, Flaherty said Sunday in a conference call from Brazil.
"I suspect part of the message (Prime Minister Stephen Harper) will deliver to premiers is we need to be careful that we're realistic and stable in our economic policies," he said.
"To the extent that provinces and territories can provide additional stimulus through their policies, that's a benefit to Canadians overall."
One area that Canada can move on immediately, Flaherty said, is to speed up infrastructure projects already in the planning stages.
The finance minister was speaking from Sao Paulo at the conclusion of a meeting of ministers from the G20 group of countries.
Flaherty welcomed China's decision to spend US$586 billion for infrastructure projects, saying the move will be good for the world economy -- and for exporting nations like Canada. He added that other countries will likely make similar announcements in the near future.
A spokesman for the minister said in an email message that Flaherty also believes Ottawa may be able to step up to the plate to inject stimulus.
"Given the situation, we can't rule out further fiscal action," Flaherty spokesman Mike Storeshaw said. "I can't speculate on if or when that might occur, but he won't rule out further action as we monitor the economic situation going forward."
In his news conference, Flaherty noted that previously introduced federal tax cuts are already adding $1.4 billion in stimulus to the Canadian economy this year and will provide a boost of almost $2 billion in 2009.
But the minister also noted the economic situation has deteriorated recently, citing a move last week by the International Monetary Fund to lower its growth forecasts from only a month earlier. The IMF now predicts the G7 countries will fall into a recession next year -- with the exception of Canada, which is forecast to post a minuscule 0.3 per cent growth.
"That's how significant this economic downturn is, that even the passing of one month reduced expectations in terms of economic growth," Flaherty said.
The G20 meeting of finance ministers, a precursor to next weekend's leaders summit in Washington, concluded Sunday with agreement to increase the role of key emerging economies in decision-making in international institutions, but no clear direction about how to reform the system.
Last week, European leaders proposed a 100-day period for a wholesale overhaul of the international rules -- or lack of them -- that proved so ineffective in preventing the biggest financial systems breakdown since the Great Depression.
Canada, the U.S. and Japan want a more modest approach to reform -- tightening international oversight and regulations but leaving national systems primarily responsible for managing their affairs.
In Brazil, Flaherty said Canada introduced a five-point plan on renewing the global economic system that calls for stricter international oversight to ensure deficiencies in some nations don't undermine the stability of others.
"There has to be some sort of stable way of financial systems in one country to be able to rely on the stability of financial systems in other countries," he said. "I expect the leaders will be addressing that next weekend."
In the final communique, the ministers agreed: "Institutions must be comprehensively reformed so that they can more adequately reflect changing economic weights in the world economy and be more responsive to future challenges."
World Bank president Robert Zoellick said key nations like China, Brazil, India, Russia and Mexico need to be brought into the process. Flaherty said emerging nations should also play a role in the Financial Stability Forum now comprised of the G7 nations.
