Justin Trudeau points to interest rate cut as proof Tories lack fiscal prudence

Liberal leader Justin Trudeau says Wednesday's surprise announcement by the Bank of Canada to cut its interest rate is further proof the Conservatives are bad managers of the economy.

"It's not particularly fiscally responsible to put all your eggs in the same basket, to pin all your hopes on oil prices remaining high and when they fall being forced to make it up as they go along," Trudeau repeated after emerging from caucus in London, Ont., on Wednesday.

Trudeau and his three-dozen Liberal MPs heard from municipal leaders and economic experts on Tuesday morning as the Bank of Canada cut its overnight lending rate by a quarter of a percentage point — the first change in the key rate since September 2010.

"What manufacturers and municipalities need is a partner in Ottawa to collaborate with them to make sure that we are diversifying our economy in all sorts of different ways, so that when challenges come in one sector there are other sectors to build on and to grow on, and that's the kind of strong leadership that Canada needs," Trudeau said.

Asked whether the government should abandon its plan to balance the budget given the current economic uncertainty, Trudeau would not say.

Economists say it makes little practical difference whether the government posts a small deficit or a small surplus.

Finance Minister Joe Oliver, who was at the World Economic Forum in Davos on Wednesday, told Reuters that a decision by the country's central bank to cut interest rates had been clearly influenced by a decline in the price of oil.

Oliver said last week the budget would be delayed until at least April given "current market instability."

Those comments came after TD Economics updated its forecast to project a $2.3-billion deficit in 2015-16 followed by a $600-million deficit for 2016-17, rather than the $1.6-billion surplus the government had projected for 2015-16.

NDP Leader Tom Mulcair said Wednesday's rate cut shows that the pressures on the economy are greater than the government is willing to admit.

"It's a 'duck and cover' approach that Mr. Harper has been proposing," Mulcair told reporters in Toronto. "[The prime minister] hasn't put anything on the table, in fact the only thing that he's come up with is a plan to take billions of dollars from the middle class and give it to the wealthiest 15 per cent in Canada."

Infrastructure fix?

Jayson Myers, the president of Canadian Manufacturers and Exporters, was at the Liberal caucus meeting to give a presentation on the economy. He said later he was surprised by the cut in the key interest rate.

"The worrying aspect of this rate cut is that it's a signal that the overall economy is expected to slow down considerably," Myers said.

Liberal finance critic Scott Brison said the decision was a signal that the Bank of Canada was taking the slow economic growth "very seriously."

Brison said the federal Liberals are looking at a recently struck deal between the Quebec government and its pension fund manager to build new public infrastructure as a potential solution to Canada's infrastructure woes.

"Canadian pension funds are actively building infrastructure around the world, and we ought to be having conversations with them about what we need to do to partner with [them]," Brison said on Wednesday after hearing from a panel of economic experts during the caucus meeting.

The Quebec government announcement last week a plan to have the Caisse de dépôt et placement du Québec, the province's pension fund manager, take over the financing and ownership of infrastructure projects beginning with two light-rail projects.

"It's very interesting the leadership coming out of Quebec on infrastructure and … that's one of the models that we ought to consider,"

"There is an opportunity now to actually fix our infrastructure, and to enable our pension funds and other pension funds to partner with government and make that happen. All it takes is leadership."