Budget 2009: Industry associations cautiously optimistic

This year’s federal budget has evoked cautious optimism from an industry turned cynical by the current financial climate.

Greg Pollock, CEO and president of Advocis, doesn’t remember seeing such a broad-based budget in a long time. Given the tough economic conditions, not just nationally but globally, he thinks the budget takes a rather balanced approach. He’s especially pleased with the government’s clear plan to deal with the horizon. “The budget doesn’t present a deficit scenario that will go on year after year.”

He strongly commended the government’s financial literacy initiative —which promises to educate Canadians and protect them from confusing, unreasonable credit-card requirements — calling it extremely valuable and saying, “All Canadians should have access to financial advice.”

He’s hopeful the budget will put us back on track. “It will be a success if it collectively gets us out of the woods and put more money in the pockets of average Canadians.”

The Investment Industry Association of Canada (IIAC) had put out a formal wish list for the 2009 budget. Even though some key initiatives they’d hoped for weren’t addressed, president and CEO Ian Russell called it a hopeful budget, overall. “It wouldn’t be fair to call it disappointing.”

Russell was impressed finance minister Jim Flaherty managed to address some of the problems faced by credit markets. He supported federal efforts to improve the functioning of capital markets to stimulate credit flows to the real economy. “Measures such as an additional $50 billion to the Insured Mortgage Purchase Program and the establishment of a credit facility to purchase asset-backed securities will bolster liquidity and encourage increased lending.”

Russell was also excited about the impending transition toward a single securities regulator. “In the past, it’s always been talk. The minister deserves a lot of credit for finally making it happen. There is increased confidence in the markets because of this move.”

Russell felt let down because the budget didn’t lower taxes on capital gains. “The initiative wouldn’t have cost huge money and it would have helped stimulate savings and investment in the economy,” he said. He was also disappointed the budget didn’t introduce reform to the RRSP and RRIF programs to help rebuild retirement savings devastated by the recent market collapse.

The budget did not give seniors the much hoped-for two-year moratorium on minimum withdrawals from Registered Retirement Income Funds (RRIFs), although it stood by the previously announced 25% reduction in the minimum RRIF withdrawals required for the 2008 tax year.

Keith Costello, president and CEO, Canadian Institute of Financial Planners (CIFPs), lauded the budget as being a good balance between stimulus spending and tax cuts. He said tax cuts will have an immediate impact, and every bit counts. “Philosophically, every additional cent should go back into consumer hands, that’s where it best belongs.” He was also heartened to see the government didn’t pander to widespread fear mongering and resort to over stimulating the economy or downloading the deficit on municipal and provincial levels. “We aren’t in the same state as the United States. We don’t need that kind of deficit spending.”

His main concern was that while proper public investing and infrastructure spending can boost growth in the long-term, “would the allotted money really make it into the system in the short-term? Can they get the money quickly out to various projects and combat recession?”

Barb Amsden, director of strategy and research at the Investment Funds Institute of Canada (IFIC), said after all these tough times, the government surprisingly had an easier budgeting task than expected. “And they were able to do both — cut taxes and undertake spending.”

She was heartened to see the spending was targeted and temporary, with most new programs short-term in nature and with clear expiry dates.

While the Canadian Federation of Independent Business (CFIB) said the budget would provide a certain stimulus to the economy, it remained concerned with the large deficits, and questioned whether this level of spending is really necessary in the current economic context. “The number one priority for small business in this budget is to see signs of stability that would build confidence,” said CFIB president Catherine Swift. “There are measures that will benefit Canada’s small business owners but we remain very concerned with giant deficits.”

Given small businesses’ role as a stabilizing force in Canada’s economy, CFIB is calling on all political parties to provide messages of political and fiscal stability to Canada’s entrepreneurs.

(01/27/09)

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