By Louise Egan
SASKATOON, Saskatchewan, Dec 18 (Reuters) - Canada's finance minister and central bank chief will lean on banks to keep loans flowing to companies and consumers in a meeting scheduled for early January, Finance Minister Jim Flaherty said on Thursday.
Flaherty also said additional tax cuts by the federal government are on his agenda for the Jan. 27 budget, alongside increased spending in areas such as infrastructure.
He made the remarks to reporters in Saskatoon after announcing the creation of an economic advisory council, comprised of 11 high-profile business and financial experts, to help him sort through various spending and taxation ideas.
Both Flaherty and Bank of Canada Governor Mark Carney urged banks publicly on Wednesday to avoid hoarding capital and keep credit flowing to businesses and households during the tough economic times.
"He (Carney) and I are meeting with bank CEOs at the beginning of January and I expect them to make it evident to us that they are taking steps to make credit more available in Canada," Flaherty said.
Banks are under market pressure to raise their capital levels even though they are higher than required by regulators and above average by global standards.
The lack of credit availability emerged as a top priority for provincial finance ministers in a meeting with Flaherty on Wednesday.
As Flaherty prepares his budget amid intense pressure from opposition parties to ramp up stimulus spending to offset a recession, much of the focus has been on fast-tracking infrastructure spending.
But he appeared to give equal weight on Thursday to further tax cuts -- above and beyond a sweeping tax cut package introduced in 2007 -- as a way to boost spending in tough times.
He was asked in the news conference if the option of additional federal government tax cuts was on the table.
"Yes, it is an option," he said.
"As you know, there are two basic ways of stimulating the economy further. One is tax reductions and the other is additional spending in areas like infrastructure. They're both on the table."
He said he hoped to get advice from the newly appointed council of experts on both taxation and spending matters. Their first meeting is next Tuesday in Toronto.
The council is chaired by Carole Taylor, the former finance minister of British Columbia. It also includes prominent business leaders such as Paul Desmarais Jr. and James A. Pattison as well as economist and tax expert Jack Mintz.
The group will advise Flaherty on the upcoming budget and beyond.
"I wanted a group with some more prominence so there could be more continuity to the discussions, so I chose a group of eminent Canadians, all of whom agreed to serve," Flaherty said. (Reporting by Louise Egan, editing by Peter Galloway)
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