Ottawa should resist balancing budget at all costs, accounting group says

TORONTO — Ottawa should resist balancing the federal budget at all costs, a new report by the Certified General Accountants Association of Canada suggests.

The group said in a report to be released Thursday that the government should resist tinkering even as there if there is a risk that there could be a deficit within a couple of years.

"Raising taxes or curbing spending would in our view exacerbate the very triggers that might cause a deficit to begin with," the report suggested.

"And while it is not our preference, Canada would have little difficulty in borrowing money if ever the fiscal drain envisioned by some was to be faced. The fact of the matter is that the planned surplus course should not be altered to accommodate current indicators."

The accounting group said Canada must look at the economic long term.

"As an accounting association, we are naturally attracted to the prospect of eliminating debt for the benefit of current and future stakeholders," the association said.

"We are also more prone to controlling expenses with a view to investment and renewal and prescribing tax revenue models which are most efficient over those which tax capital investment, innovation and productivity."

Gross domestic product in Canada fell 0.3 per cent in the first quarter and economists and policy makers have been routinely revising their growth projections for the year, all trending downward.

The Bank of Canada warned of rising inflation last week while lowering its 2008 growth forecast from 1.4 per cent in April to one per cent, while the Conference Board of Canada downgraded its projection from 2.2 per cent this spring to 1.7 per cent.

For both, it was the second downward revision so far this year.

Finance Minister Jim Flaherty has repeatedly insisted Ottawa won't fall into a deficit, even as the Canadian economy has shown signs of a slowdown.

"We are on track in terms of our budget in Canada, that we will continue to run a surplus," he said last week.

Federal coffers received a boost this week with the end of the wireless spectrum auction that will add an additional $4.25 billion which Ottawa has said will go into general revenue and likely keep the budget in surplus even if there is a dramatic loss of revenues due to an economic downturn.

Source : http://canadianpress.google.com