Friday, October 17, 2008

Economic survival and resource management

Canadian politicians are frequently inspired by Australia, in part because the two countries' economies are similar. But Australia's handling of the global financial crisis offers a cautionary tale for Canada's next government.

Over the weekend, Australia's Prime Minister Kevin Rudd introduced a $10.4-billion (Australian) stimulus package, joining many other major governments in using taxpayers' money to buoy its sagging economy.
Globe and Mail - Canada

If the two country’s economies are so similar then why does Australia have a winning surplus and Canada will find it impossible, to put together even a small rescue package? Where are the results of Canada’s oil and mineral exports? Especially when you consider Canada is the major source of US oil.

The answer it seems is in a the differences in the relative federal systems. Unlike Australia, Canada’s Constitution deems natural resources located onshore are almost all owned by its provinces (states). Resources in the three Northern territories are federally owned and a few Aboriginal First Nations also have significant natural resource wealth.

“As a result, the role played by natural resource revenues in generating inter-regional fiscal disparities occupies a much greater place in the public discourse in Canada than in most other countries” Rona Ambrose- President of the Queen's Privy Council for Canada

The mix in the Australian situation is more complex, with the states taking a share of royalties with the federal government; then fiscal adjustments are made to compensate states without the resource income. It should be noted that there is also provision for some Aboriginal claimed territories, though not to the level we see in

There are other significant difference in our federal models. The Australian constitution Section 92 provides that "trade, commerce, and intercourse among the States shall be absolutely free". In Canada the corresponding provinces held rigidly to the freedom of each jurisdiction to guard and protect their own interests.

As much as I would like to see particular constitutional change in Australia the current global crisis gives me pause. We are not perfect, but there are elements in the mix that are a real credit to the framers of our constitution. With all its faults it is still a model federalist constitution. National resources belong to the nation!


D.K. Raed said...

Thanks for explaining this. Otherwise I might've thought the reason Canada (vs Australia) will not find itself in a surplus condition is due to its relative proxmity to the U.S.

It's also very curious that Australia's definition of Federalism matches what one would expect the word to mean. Here, the people who call themselves Federalists are pure State-Righters, wanting almost complete autonomy for each state and a very shrunken federal govt.

Cart said...

DK, poor old Canada has all those Mericats who jump the border. It really is a strange hybrid between systems. I have to admit I still don’t understand, regardless of the split, why there is almost deficit territory in Canada. I can’t find the figures, but I expect it is a matter of under pricing. How else would Canada become the primary oil provider?