The Canadian Press

Canada’s economy is still on shaky ground, but the federal government remains determined to rein in spending in the next budget, Canada’s finance minister said Monday.

At a stop in Winnipeg on his pre-budget consultation tour of the country, Jim Flaherty said the economy is slowly recovering but there are areas of concern.

“As you can see from the employment numbers, there is still reason to be concerned about the performance of our economy and particularly the United States economy,” said Flaherty before meeting with area business leaders and academics. “The economy is still recovering and has not recovered.”

His pre-budget consultations have only just begun, but Flaherty said he has already heard worries about unemployment, access to credit and the battered Canadian manufacturing sector. While he said consumer confidence is relatively high in Canada, it will take a while for that confidence to trickle down to employers.

“We’re likely to see a lag in employment,” Flaherty said. “We’ll start to see more economic recovery but we’ll still see flat employment numbers. It takes time for businesses to gain the confidence to hire people again.”

Stimulus spending from the previous budget will continue to flow throughout this year, but after that the focus will be on taming the deficit, Flaherty said.

To make a dent in the ballooning deficit — currently pegged around $56 billion — Flaherty said there will be no new spending announcements in the budget and there will more likely be spending cuts. How deep those cuts might be will depend on the growth of the Canadian economy.

“If we have sufficient economic growth, we won’t have to do as much,” he said. “But if we don’t have as much economic growth, we’ll have to restrain the rate of growth of spending … Inevitably, there will be some government programs that will come to an end. Just because a program is created by a government doesn’t mean it goes on forever.”

Program spending accounts for about $100 billion and is growing at a rate of just over 3%, Flaherty said.

Despite the austere talk, the finance minister said some areas will be protected from cuts. Ottawa won’t reduce transfers to the provinces or spending commitments made to pensioners or the disabled, he said.

“Those types of benefits that are direct transfers from the government of Canada to individual people in Canada,” he said. “We’re not going to touch either of those areas . . . But we still have that large piece of spending, which is program spending, that we can address.”