Canadian finance minister set to stay in post for next budget

By Randall Palmer

WINNIPEG, Manitoba (Reuters) -- Paul Martin, speaking amid speculation of an imminent Canadian Cabinet shuffle, said Thursday he intended to remain at his post as finance minister and deliver the next federal budget, expected in February.

Martin, often seen as the frustrated heir apparent to Prime Minister Jean Chretien, also welcomed Canada's "tremendous" economic growth statistics released Thursday, saying they showed "the great strength of the Canadian economy."

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One persistent scenario has been that Martin -- unable to take over from Chretien, who seems determined to seek his third term -- would be asked to become foreign minister. Lloyd Axworthy, the internationally respected minister at the post now, intends to step down to take an academic post.

Asked if he would stay on to deliver the next budget, Martin said: "Obviously I will, if I am the finance minister, and I certainly intend to be the finance minister, but that's a decision for the prime minister."

Martin, without whom the Liberals' re-election chances would be severely damaged, is fiscally more conservative than Chretien and significantly more popular.

Martin was speaking near the end of a three-day Liberal parliamentary caucus, during which there has been none of the open sniping at Chretien from his supporters that marked a Liberal convention in March.

The finance minister distanced himself from reports that relations with Chretien have been so strained that the two basically talk only at Cabinet meetings.

"The prime minister and I have worked very, very well together. We're going to continue to do so," he said.

Martin has presided over the elimination of a C$42 billion ($28.6 billion) deficit the Liberals inherited from the Progressive Conservatives in 1993 and he has begun cutting income taxes.

The Liberals' biggest challenger is the right-wing Canadian Alliance, which wants to cut taxes faster. Martin's departure would worry not only financial markets but also could persuade some Liberal voters to shift to the Alliance.

The next budget, which will be brought down before elections forecast for the spring or early summer, is expected to speed up tax cuts, and the task will be made easier by Statistics Canada numbers showing the economy growing in the second quarter at an annualized rate of 4.7 percent, after accounting for inflation.

"When you begin to look underneath those numbers, what you see are signs of ongoing strength -- the tremendous investment in machinery and equipment, the tremendous investment in information technology, which is going to lead to ongoing increases in productivity," Martin said.

"At the same time, you see disposable income up, and that means that Canadians' standard of living is continuing to rise, and I think that what that shows is that the Canadian economy is certainly in a position for long-term sustained growth."

Martin displayed no concern that the growth would have been weak were it not for purchases of computers and related equipment.

"There is no doubt that the engines of growth throughout North America are the information technologies, and that's what's in fact done it for the (United) States, and I think it's showing that in Canada that we really are taking a march on the rest of the world," he said.

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