The federal budget initiatives intended to provide short-term support to individual Canadians and businesses, facilitate the flow of credit through the capital markets, and lay the foundation for recovery have received the support of the Investment Industry Association of Canada.

The federal stimulus package announced Tuesday will result in a $34 billion deficit for the fiscal year 2009-10 and $30 billion the following year.

“While this budget marks a return to deficit financing, it is a temporary fiscal strategy to offset the impact of the global slowdown. Moreover, unlike the years of similar deficits in the first half of the 1990s, public finances are in far better shape to absorb the increased debt load,” says Ian Russell, president and CEO, IIAC.

The IIAC says it supports the measures 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,” says Russell.

Additionally, the IIAC is pleased the government has announced a transition plan for a Canadian Securities Regulator. A single securities regulator will improve the efficiency of capital markets and facilitate needed reforms to protect against systemic risks in financial markets.

Steps taken to provide tax relief to individual Canadians are welcomed. However, the IIAC is disappointed the budget has not lowered taxes on capital gains to stimulate savings and investment in the economy, nor introduced needed reform of the RRSP and RRIF programs to rebuild retirement savings devastated by the recent market collapse.

IE