internationally.
For Canadians, these honours produce
The United Nations has deemed Canada the best country in the world in which to live.
Our commitment to equality and diversity has played a significant role in this achievement.
The openness and respect that Canadians show one another distinguish Canada internationally.
tangible advantages that multiply our social, cultural, and economic vitality.Canada's cultural and linguistic diversity attracts busi-ness, talent, and expertise from around the world. Our international character and citi-zenry allow us to make global contacts and playa leadership role internationally, whether in business, in humanitarian aid, or in diplo-matic endeavours.
The Liberal government is committed to sustaining and building on the twin virtues of equality and diversity that account for so much of our success and that will continue to benefit all Canadians in the future.
We will allocate our budget surpluses so that, over the course of our mandate, one half will be spent to improve our programs, and one half will go to tax cuts and reduc-tion ofthe debt.
A
strong economy is the essence of a strong society. The belief that there can beno real security without a strong economy has been firmly and steadily advanced by this government.Since taking office in 1993, we have taken responsible and balanced action to get our finances in order and restore Canada's economic health. We have relied on the cooperation and sacrifice of all Canadians to reach our goals.
While we recognize that this has been apainful process for many people, all of us are now beginning to see a return on our investment in Canada's economic future.
A New Confidence and Optimism
The Liberal government has pursued atwo-track approach to restoring Canada's economic health.
Our objective has been, remains, and will be to stimulate job creation and economic growth. But meeting this objective not only requires policies that promote jobs directly; italso requires putting the finances of the country on a sound and sustainable footing.
Less than four years ago, Canada's finan-cial health was inrapid decline. For decades, governments had been spending much more than they were recovering in revenues. They borrowed extensively, here and abroad, saddling Canadians with an unwieldy mortgage on their future.
When we were elected, the country's finances were being strangled in the ever-tightening grip of compound interest. The deficit stood at $42 billion and was threatening to climb even higher. The federal government's debt-to-GDP ratio - what Canada owes as compared with what it produces - had risen from 19 percent in the mid-1970s to over 70 percent in 1993, and itwas still climbing.
High deficits and mounting debt were pushing interest rates up, slowing economic growth and killing jobs.
As a result, international financial markets were demanding from Canada a very large risk premium on top of their lending rates - and adding huge costs for borrowing to a total debt
that was already beyond our means. By 1993, Canada's economic sovereignty had been under-mined as we were held hostage to the opinions and demands of every market lender to whom we owed money.
In a world of volatile markets and instanta-neous capital transfers, we were losing our ability to chart our own course for sustained economic growth. Canada had almost lost control of the economic levers that amodern industrial economy needs to provide an accept-able standard of living for its citizens. We no longer had the power nor the freedom to make our own financial choices.
There are many and varied opinions about what landed us in this unhealthy fiscal state.
For the Liberal government, the most important issue was not how we got into this situation, but how to put ourselves back on solid ground.
Without dramatic action to restore the nation's fiscal health, we would all be paying an enor-mous price - one that would bemeasured in high interest rates, fleeing investment, lower income, and lost jobs.
Canadians knew that their nation's finan-cial problems required more than a quick fix.
They wanted a permanent fiscal recovery. The Liberal government shared this view. We recog-nized that astrong and enduring fiscal recovery was a prerequisite to boosting employment and preserving our social safety net.
To achieve a strong and lasting recovery, we had to create a climate conducive to lowering interest rates and to installing the foundations of a sound economy. As afirst step, our govern-ment set about restoring confidence in the way we do business.
That, inessence, is what our four budgets have been about: restoring confidence in Canada and recapturing our economic sovereignty.
Today we have good reason for optimism. We have regained the ability to set priorities as a society and to make wise and strategic invest-ments in our future, rather than preoccupying ourselves solely with the debts of the past.
Reducing the Deficit
The Liberal government has laid the ground-work for a strong economy by demonstrating fiscalresponsibility and fairness in pursuing deficitreduction and low inflation. Canada has earned a reputation as alow-inflation country whosebusinesses are now able to plan and investfor the future.
Moreover, we have made dramatic progress inrestoring the country's fiscal health. Our interimtarget for balancing the budget was to reducethe deficit from 6 percent of GDP ($42 billion) to 3percent of GDP ($24 billion) by1996-97. That commitment has been
exceeded. Indeed, the deficit for 1996-97 will be well below our target and more than $26 billion lower than it was when we took office.
As stated in the budget plan of February 1997, "Financial requirements - the amount of new money the government has to borrow on credit markets - will be ina small surplus by 1998-99. The last time financial requirements werein balance or surplus was in 1969-70.
"Financial requirements isthe measure used by most other major industrialized coun-tries, such as the U.S., to measure their financial position. On this basis, zero financial require-ments would imply a 'balanced' budget. Based on the budget plans of the Group of Seven (G-7) countries, Canada will be alone in having achieved this milestone in 1998-99."
We are moving towards a time when the budget will finally be balanced, the debt-to-GDP ratio will be declining, and the government will havea fiscal surplus. When we reach that time, we will allocate every billion dollars of fiscal dividend so that one half will go to a combina-tion of reducing taxes and reducing the national debt, and one half will address social and economic needs through program expenditures.
Even before we achieve a balanced budget, bymeeting or exceeding our fiscal targets, the Liberal government has been able to make strategic investments and selective tax cuts, both to enhance jobs and growth and to build a stronger and fairer society. The budgets of 1996 and 1997 addressed pressing needs in the areas