11-010-XIB
Canadian Economic Observer
March 2008

Canada

The federal budget was tabled with a forecast surplus for 2008/09 of $2.3 billion. Highlights include a new $5,000 tax-free personal savings account and an extension of accelerated capital cost allowances for manufacturing.

BC released its budget with a forecast surplus of $50 million and a $750 million contingency allowance. Highlights include a new carbon tax effective July 1 which applies to all fossil fuels, a drop in corporate taxes from 12% to 11% on July 1, a cut in small business taxes, a reduction in personal income tax in 2009 and increased health care spending of $2.9 billion over three years.

Canadian Natural Resources revised its cost estimate for its Horizon oil sands project to $8.7 billion (up 28% from its original estimate) in order to start production as scheduled in August. It affirmed that Horizon was on schedule to start producing this summer. The National Energy Board approved the $2 billion Alberta Clipper pipeline proposed by Enbridge connecting the oilsands to the central US.

World

The Bank of England cut its key lending rate by a quarter point to 5.25%.

GM offered buyouts to its entire US hourly workforce of 74,000 to allow the company to save money by paying new workers significantly less in pay and benefits than its current workforce.

In the US, a $152 billion economic stimulus package will deliver tax rebate cheques of $600 to $1,200 per household beginning in May.

Credit Suisse revealed $2.85 billion in losses on its holdings in complex credit assets known as residential mortgage-backed securities and collateralised debt obligations. Several traders were suspended for pricing errors.

Japan’s three biggest banks announced losses of $4.69 billion as a result of exposure to US subprime mortgage products and other structured securities.