Canada's finance minister undecided on 2015 run amid health issues

MELBOURNE (Reuters) - Canada’s Finance Minister Jim Flaherty has not yet decided whether to run for office again in the 2015 general election, he told Reuters on Tuesday, amid speculation he may step down before then to attend to health issues.

Canada's Finance Minister Jim Flaherty speaks during Question Period in the House of Commons on Parliament Hill in Ottawa February 13, 2014. REUTERS/Chris Wattie

“We’ll see. I haven’t decided,” Flaherty said in an interview when asked to confirm his intentions.

He answered “yes” at a November 13 news conference when asked whether he would run for re-election in October 2015 in the southern Ontario district he represents.

Flaherty suffers from a rare but non-fatal skin disease that causes blisters and is usually managed with powerful steroid medication.

He had long been one of the most vocal cabinet ministers in Prime Minister Stephen Harper’s Conservative government and gave frequent speeches to promote the government’s agenda. Since going public with his condition over a year ago, he has sharply scaled back his activities and travel.

He made an exception to attend the meeting in Sydney last week of the Group of 20 finance ministers and central bank governors and was in Melbourne on Tuesday for a business forum.

Flaherty, 64, has vowed to stay on the job until he eliminates the country’s budget deficit, and he repeated on Tuesday that he expects to achieve that without difficulty next year well before Canadians go to the polls.

In remarks to a business audience on Tuesday, Flaherty, a veteran of G20 meetings, urged his colleagues to focus on balanced budgets. Australia’s Treasurer Joe Hockey, an ideological ally, described him as a voice of fiscal conservatism and a “a fantastic spine stiffener” within the group for questioning any talk of more taxes or regulation.

Flaherty repeated his criticism of the U.S. Federal Reserve for its bond-purchasing program designed to stimulate the economy and which it is now in the process of tapering.

“I was never a fan of the approach the Fed took,” Flaherty said of the so-called quantitative easing, which the Canadian central bank also considered during the crisis but never used.

“I think there’s a risk and now we’re seeing the consequences of having to get out of it ... and it’s very difficult on the emerging economies.”

Flaherty raised eyebrows last October when he said the Fed should end its bond purchases as quickly as it could.


He would not be drawn into reacting to earlier remarks made by Nouriel Roubini, chairman of Roubini Global Economics and an economics professor at New York University’s Stern School of Business, that the value of the Canadian dollar was too strong and the Bank of Canada should commit to keep interest rates low for longer or adopt an easing bias in order to weaken the currency.

Asked whether he agreed the Canadian dollar was overvalued despite depreciating sharply in recent months, Flaherty said, “I wouldn’t characterize it in any way other than that it’s a market currency. The market decides where the dollar sits.”

The Canadian dollar has depreciated about 10 percent in the past year to the relief of exporters, but Roubini said it needed to fall another 10 percent to really help struggling manufacturers.

On another issue grabbing attention in Canada, Flaherty signaled that Ottawa is willing to provide financial assistance to Chrysler Group LLC, which has said a decision on whether to go ahead with an investment in a Windsor, Ontario, minivan plant hinged on incentives from the federal and provincial governments.

“The auto industry has been a special case in Canada because of its importance in the manufacturing sector and in Ontario,” Flaherty said, adding that he had not yet seen a proposal from Chrysler.

“We have an investment fund that I referred to in the budget last week and it’s available for investments in plants and equipment,” he said.

Industry Minister James Moore, not Flaherty, is in charge of industrial policy but Flaherty would likely be informed of the government’s intentions.

His budget this month increased the amount of subsidies available for the sector by C$500 million ($451.69 million) in a bid to arrest the decline in the country’s share of the North American car manufacturing.


In the interview, Flaherty indicated he is not overly concerned about the state of the housing market and said, as expected, there are no imminent plans to intervene in the mortgage market to curb lending after having done so four times already since 2008. But he said it would be “unwise” to rule it out as a tool in the future.

Canada’s housing market caught fire following the 2008-09 recession as ultra-low borrowing costs prompted consumers to take on record-high debt and led to exorbitant prices and overbuilding.

While many economists still worry about an eventual collapse, the latest data on prices and sales underscore the view that the real estate market should be softer but relatively stable this year as borrowing costs rise.

For now, the minister is focused on increasing scrutiny of the mortgage insurance business of the federal housing agency, the Canada Mortgage and Housing Corporation (CMHC), and encouraging the growth of private mortgage insurers.

“We keep a close eye on it. We have a new chair and we have a new CEO. There’s much more financial expertise now at CMHC than there was before,” he said.

In Canada, high-risk mortgages - where the borrower has paid less than a 20-percent down payment on a home - are required to have insurance that is provided by CMHC.

Flaherty has expressed concern about CMHC’s role in selling insurance to banks to cover portfolios of mortgages that do not otherwise require insurance, because of the risks to taxpayers. ($1 = 1.1069 Canadian dollars)

Reporting by Louise Egan; Editing by G Crosse, Lisa Shumaker and Ken Wills