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Canadian Prime Minister rolls back retirement age to 65 from 67, admits previous government made a mistake.
Prime Minister Justin Trudeau’s Liberals will keep 65 as the age when Canadians can begin to collect state-pension benefits, reversing the previous government’s decision to raise it by two years.
“Next week’s budget will confirm that we are keeping the old retirement age at 65,” Trudeau said in an exclusive interview Thursday with Bloomberg Editor-in-Chief John Micklethwait in New York. “How we care for the most vulnerable in our society is very important.”
Trudeau is set to deliver his first budget March 22 in Ottawa after ending Stephen Harper’s nearly 10-years of Conservative rule in last year’s election. Harper’s 2012 budget increased the eligibility age for old age security to 67 from 65, starting in 2023. The former prime minister told the World Economic Forum in Davos, Switzerland that year the country’s aging population may “undermine” economic growth without reforms to the country’s pension systems.
“Obviously someone who has worked as an investment banker or a lawyer all their life, 65 is not necessarily an age where they need to retire,” Trudeau said. “Anyone who has worked with their hands as a laborer or assembly line worker or worked in the resource industries and has been in a much more physical job, once you start reaching 65, regardless of the advances in Canada’s extraordinary medical system, there are real challenges over how much someone can keep working in certain jobs.”
Trudeau announcement marks another departure from the policies of Harper’s Conservatives. The Liberal embrace of deficit spending is in stark contrast to the efforts by the previous government to close the spending gap, and Harper’s championing of balanced budgets on the world stage.
The federal government is expected to post a shortfall of about C$30 billion ($22.5 billion) in its budget, with about C$10 billion devoted to infrastructure spending.
With Canada’s shift, Trudeau is leading the charge among government leaders calling for a more active fiscal policy. The Group of Seven is now almost evenly split between deficit-spending advocates and austerity hawks, like Germany and the U.K.
“A lot of people are on the austerity side, thinking we have to control government spending,” Trudeau said. “Canada is positioning itself on the investment side. This idea that confident, optimistic countries will invest in their futures.”
At the same time Trudeau stressed his deficit spending is not meant as short term stimulus to help Canada’s economy overcome the collapse in oil prices that sparked a mild recession last year and still weighs on growth. He said he is focused on long term projects that will increase productivity, but may take longer to ramp up.
The first two years of spending will be “unsexy” things like recapitalization of infrastructure and upgrades, like restoring signal systems on subways, while the new roads, bridges and hospitals he promised in his campaign will come later, he said.
“We feel what we’ve put forward is what the economy can absorb in terms of creating long-term growth,” he said. “I don’t know that throwing much more money at infrastructure this year for example is going to result in the kinds of productivity gains or growth for the economy.”