OTTAWA — Five years ago, as the world economy was still trembling in the aftermath of the 2008 financial crisis, Canada hosted a meeting of the G-7 finance ministers and top central bankers.

The man in charge was Canada’s late finance minister, Jim Flaherty, who decided to hold the meeting in Iqaluit in early February. A simple glance at weather history would tell you that not only was it likely to be extremely cold in Iqaluit in the depths of winter but when storms brewed in the Arctic, Iqaluit’s airport could be shut for days. Not a welcome prospect when your guest list included U.S. Treasury Secretary Tim Geithner and European Central Bank President Jean-Claude Trichet.

Flaherty went ahead, convinced a meeting in Iqaluit would be a great way to highlight Canada’s Northern presence. The weather turned out to be sunny and relatively mild. The world’s top financial leaders were rewarded with Canada Goose parkas and got a chance to go dog-sledding. The meeting was a huge success. Lady luck had shone down on the government.

Luck had served Flaherty and the Harper government well from the moment they took power in 2006, particularly when it came to the economy. The Liberals had bequeathed the Tories a sound fiscal situation and a string of surpluses, so much so that in its early years, the Harperites could cut taxes and still boost spending on their favourite causes like the military, with seemingly no consequences. They also inherited a well-regulated banking system and an earlier ban on bank mergers that meant no Canadian bank was big enough to swagger on the world stage and do the kind of foolish things their U.S. and UK counterparts ended up doing. These factors, the consequence of Tory fortune rather than policy decisions, made a real difference when the financial crisis hit.

But the Tories’ real stroke of luck was that resource prices, particularly oil but also coal, iron ore and other commodities, remained strong even after the financial crisis, reflecting China’s continued growth. As manufacturing in central Canada collapsed, the West surged, filling federal coffers and providing jobs to unemployed workers from Central and Eastern Canada.

What’s more, real-estate prices not only didn’t dip, they kept roaring ahead. Again, luck was the major factor at play. Like other bubbles, Canada’s real-estate boom was powered by its own internal logic, as well as low interest rates. It didn’t really make any sense but the politicians weren’t about to complain. When it came time to vote, Canadians peered south of the border and saw devastation when it came to employment and house prices. Canada was doing pretty well so they held their noses and voted for Prime Minister Stephen Harper, in 2008 and 2011.

Now, almost a decade on, Flaherty is gone and the Harper government’s remarkable stretch of luck is at an end. The collapse in the price of oil isn’t the fault of Harper or his hapless finance minister, Joe Oliver, but neither was the run-up in the price to their credit either. There’s nothing wrong with taking advantage of fortuitous circumstances. The problem occurs when you take that luck for granted, promising tax cuts and a return to surplus when prudence would have told you to hold off.

By delaying the federal budget to April, Oliver is clearly crossing his fingers, buying a rabbit’s foot and hoping that the old Flaherty luck will return. How else can one explain his remarkable comment earlier this week about oil prices? “While we’re certainly not in the business of forecasting where prices will go, certainly one thing is clear from history. It’s when prices fall a lot, they tend to go back up. So we'll take that into account as well.”

Oliver is right. Oil prices will go up again, sometime in the future, but maybe in three years, not in three months, in time to save Oliver’s budget. In fact, in the short term, oil prices could decline further, making federal budget-making even more difficult.

Good luck only lasts so long. The next time you organize an international summit in Iqaluit in winter, there’s a good chance you’ll do it in the middle of a blizzard.

Alan Freeman is Public Servant in Residence at the University of Ottawa's Graduate School of Public and International Affairs. He is a former Assistant Deputy Minister in Canada’s Department of Finance.

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