Canadian stimulus money will kick-start construction: Flaherty

OTTAWA — Back from his nearly weeklong trip in China, Finance Minister Jim Flaherty said he was astounded by the number of tower cranes in Beijing and Shanghai, signs of China's $586-billion U.S. stimulus package at work.

While not on the same scale, Flaherty said Monday that Canadians should expect to see more backhoes, trucks and hard hats in their travels as funds from Ottawa's $46.6-billion Cdn stimulus program finally begin to manifest in the cross-country economy.

"It takes time to get money out the door and working. But there is going to be more and more visibility of construction projects across Canada as we repair bridges, roads, universities, schools and so on," Flaherty said in a broadcast interview.

He added the stimulus scheme, passed in the last budget and amended slightly in June, remains "the right plan" and his government, which returns to the House of Commons next month, intends to implement it.

In an update tabled in June, the Conservative government said that $20.6 billion of the $22.7 billion to be spent this year has been approved by cabinet and the Treasury Board, and is with government departments. In reality, many construction projects had not yet been given the green light. Flaherty's comments suggest that is bound to change in the fall.

Stimulus spending around the world is credited with pulling the Japanese economy out of recession, with annualized growth of 3.7 per cent in the last quarter, the country reported Monday. Japan's first expansion in five quarters was driven by exports that jumped 6.6 per cent. Further, that government's $264-billion U.S. stimulus program helped consumer spending rise 0.8 per cent and government investment climb 8.1 per cent.

Kyohei Morita, chief Japan economist at Barclays Capital, warned the pace of growth is not sustainable "as the effects of government stimulus run their course."

Flaherty said stimulus packages in large emerging economies, like China and Brazil, are going to lead the global economy out of the recession. As it happens, the Bank of Canada expects the Canadian economy to post growth of 1.3 per cent in the current quarter, which would signal a technical end to the recession. That is to be followed by a three per cent expansion in the final three months of the year.

Bank of Canada governor Mark Carney has suggested a recovery will largely be the result of monetary and fiscal stimuli.

Meanwhile, Flaherty continued to boast about inroads made during his trip last week to China, on which Carney, banking watchdog Julie Dickson, and senior executives from Canadian financial institutions accompanied him.

He said the Chinese indicated high respect for Canada's financial services industry, of which some have business operations in China.

Despite the onset of a deep financial crisis, "those (financial institutions) that do business with China have not withdrawn capital from China," Flaherty said. "This can't be said for other western industrialized nations from China. So our reputation in China is very strong."

And while China has long sought Canadian resources, Flaherty said it is also keen to invest in infrastructure and certain elements of the manufacturing sector.

"Globalization is a reality and we should embrace this relationship" with China," he said.

Flaherty was the fourth federal cabinet minister in as many months to visit China. However, Prime Minister Stephen Harper has yet to visit the country, which is Canada's second-largest trading partner. Published reports indicate Harper may visit China in the fall.

With files from Bloomberg and Reuters