Those surpluses will vanish: economist

The small budget surpluses projected Thursday by Finance Minister Jim Flaherty in his fiscal update are "just not on" for the Canadian economy, said one economist.

Flaherty is projecting small surpluses through the government's 2012-13 fiscal year, although he said those surpluses cannot be guaranteed, given the weak economic situation.

The government's outlook for economic growth next year has gone from 2.5 per cent, projected back in February, to only 0.3 per cent.

"I think even that is too optimistic," said Patricia Croft, chief economist at RBC Global Asset Management, told CBC News, adding that she is expecting a contraction of 0.8 per cent in 2009.

Croft said she wanted to hear more about what the government plans to do with a fiscal stimulus package, which is expected with the next federal budget.

"Mr. Flaherty today talked again about infrastructure. Well, let's get on with it," she said.

Croft thinks the government should go into a temporary deficit and do things such as spend on infrastructure, help unemployed people and offer targeted help for some industries.

She believes the surpluses projected today will vanish in the next budget.

Conor Bill, a managing director at Mt. Auburn Capital, said Prime Minister Stephen Harper has a problem with running a deficit because he just said in October that the government wouldn't do that.

"They need to put some distance between themselves and that statement before they can actually say they're going to have a deficit," he said.

Canada's 'small economy' could be 'swamped'

Bill said the government may have adopted a wait-and-see approach on a stimulus package, as it wants to see what major trading partners will do.

"The reality is that Canada is a relatively small economy. Whatever stimulus package our government introduces is likely to be swamped by the effects of our major trading partners," Bill said.

The head of the Canadian Auto Workers union criticized Flaherty's update, saying it lacked support for hurting industries such as troubled carmakers.

"Today's statement does not rise to the challenge of the times," said Ken Lewenza. "It is more concerned with cutting spending to avoid the symbolism of deficit spending, than it is with keeping Canadians in their jobs and in their homes."

Public Service Alliance of Canada national president John Gordon reacted hostilely to Flaherty's move to prohibit public sector strikes and limit wage increases.

"Negotiating with the government and agreeing to accept and recommend a wage increase as the PSAC has done over the past week is one thing; legislatively rolling back negotiated, ratified and signed collective agreements and taking away the right to strike is entirely another," said Gordon.