Economists generally refer to this kind of situation as “fiscal dominance”. In order to prevent such a situation from materializing, it is important to engage in efforts to achieve fiscal reform, thereby maintaining fiscal discipline in the medium to long term.
Nevertheless, domestic demand is projected to remain strong, supported by firm commodity prices, high employment levels, and the effect of the cumulative easing in monetary policy. We at the Bank project that the Canadian economy will grow by 1.4 per cent this year, 2.4 per cent in 2009, and 3.3 per cent in 2010.