Monday, May 08, 2006

Stephen Harper Better Than Expected So Far

In late January, I dismissed Canada's newly elected conservative prime minister Stephen Harper as a Bush clone with regards to economics, based on his election promises to both cut taxes and to increase government spending at the same time.

Yet according to this story in The Economist, Harper have so far been better than he said he would be. While he have kept his pledge to cut taxes, he have contrary to his election pledges reined in spending. Because of this and because the commodity price boom have made tax revenues surge, he will now be able to reduce tax rates and still pay off billions of dollars of the Canadian national debt.

Because of these relatively wise policies, and because Canada started out with a surplus in both the government budget and the current account balance and because Canada benefits from the commodity price boom, the loonie (aka the Canadian dollar) looks set to continue its upward trend against the greenback (aka the U.S. dollar) and is likely to reach parity (1 loonie=1.00 greenbacks )within the coming year, especially if (as is likely) the greenback continues to fall against the other major world currencies.


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