Canada budget to stay course on stimulus: Flaherty

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(Reuters)

By Jennifer Kwan

TORONTO (Reuters) - Canadian Finance Minister Jim Flaherty on Friday vowed to resist big, new spending measures in his next budget, but said it was too early to pull stimulus away from a still shaky economy.

In the prepared text of a speech in Toronto, Flaherty tried to lower any expectations that he would either pump in new stimulus funds or, as others have suggested, shut off the tap before the scheduled deadline in March 2011.

"Today, there are some tentative signs of recovery. But even with some early positive signs, there is still little evidence of firm growth," he said of the Canadian economy.

He maintained the government's estimate of a record high budget deficit this year of C$56 billion ($52 billion) and a small deficit of C$5.2 billion by 2014-15.

Flaherty used the speech to head off the usual pre-budget demands from provincial and municipal governments as well as industry and lobby groups.

He said the government has only completed the first phase of its stimulus plan and the next budget, due early next year, will simply be about implementing the second phase -- no more and no less.

He called any proposals to change spending plans now "shortsightedness."

"Switching gears now, at such a crucial time, would be the most misguided approach this country could take, and would clearly put our country at risk," he said.

"It would also be an abdication of the commitment Canada and all G20 nations made to collectively complete our coordinated and substantial stimulus plans."

Canada will host the G8 next year and will co-chair a summit of the G20 industrial and emerging powers along with South Korea.

The budget deficit in Canada is a politically sensitive issue for the Conservative minority government, which has come under attack by the opposition Liberals for plunging into the red after a decade of surpluses.

Flaherty said it was too early to begin tackling the deficit and "tough decisions" on that would be postponed until the economic recovery had fully taken hold.

"When the time is right, when the economic recovery is entrenched, and if it's necessary, we will determine the amount of spending growth restraint that will be required to balance the budget," he said.

He promised not to raise taxes or limit the growth in benefits programs for individuals or transfers to other levels of government.

($1=$1.07 Canadian)

(Writing by Louise Egan; Editing by Jeffrey Hodgson)