Jim Flaherty: Three ways the new finance minister might swerve from his script

With Jim Flaherty resigning Tuesday, market watchers are anxious to know who will replace the only Finance Minister to have served under Prime Minister Stephen Harper.

Joe Oliver, the relatively new Toronto-area MP who has spent the past three years as Natural Resources Minister, is expected to be named  as the successor to Finance Minister Jim Flaherty.

Ottawa is to make the announcement as early as Wednesday, but most economists do not expect major policy changes any time soon, especially with this year’s budget out of the way.

“I would say continuity is what the market wants. Whoever steps into the role, they don’t have to be a carbon copy of Mr. Flaherty, nobody could be, but in terms of the broad policy thrust I think his choices over the years were appropriate from a policy perspective, and most people would like to see that continue,” BMO Capital Markets chief economist Douglas Porter wrote in a note to clients after Tuesday’s announcement.

However, Flaherty did have strong opinions on some issues which his successor may not completely follow. Here are three things that may be different under the new regime in the 

Finance Department, according to Porter:

 “1) He was a true fiscal conservative (small c). Flaherty almost always saw balancing the books as the number one goal, and his forte was winding down the stimulus program, not cranking it up.

2) He was particularly concerned about an overheating housing sector (often expressing concern about Toronto’s condo market), and moved four times in four years from 2008-12 to cool conditions. It’s not obvious the next FM will fully share these concerns, and may not be as hawkish on housing and will perhaps be a little more reluctant to weigh in publicly on mortgage rates. With the housing market on a cooling trend, that may not be as significant an issue anymore.

3) He openly questioned the income-splitting proposal.”

Porter said Flaherty’s resignation was a surprise only in the timing, with most observers expecting him to stay on at least until next year’s budget, when he was to officially unveil balanced books. But though the finance minister will change, the Tories’ goal to balance the budget by 2015 will not, he said.