Finance Minister Jim Flaherty opened the door Monday to new stimulus spending to help the economy weather what many economists fear is a looming global recession.
Flaherty will also join an emergency teleconference Tuesday with his G7 counterparts to respond to events that are causing havoc in the markets and sending jittery investors running for cover.
A plunge in the price of oil, a decline in factory orders in the U.S., a manufacturing slowdown in China, the eurozone financial crisis, dropping commodity prices and other economic storm clouds hovering over Canada will likely force Bank of Canada governor Mark Carney not to raise interest rates Tuesday.
The bleak outlook follows last week's dismal job numbers in the U.S. and the further decline in Ontario's automotive sector with GM's announcement that 2,000 jobs in Oshawa, Ont., could be gone by next summer.
"Canadians can rest assured that our fiscal and economic fundamentals are solid, and it also puts us in the position as government, that if we needed to take steps in response to a shock from outside Canada that we are in a position to do so because we have fiscal room to move," Flaherty said.
"Our situation isn't perfect but it's better, so we are in a position to act and protect Canada, but we are part of the world and we would be buffeted as well as other countries."
The government injected more than $55 billion into the economy during the 2008-09 financial crisis, the worst economic downturn since the 1930s and one which many countries are still struggling to get out from under.
In its most recent budget, the government announced controversial changes to old age security, employment insurance and other measures to sustain the economy in the long run and prevent the kind of budget problems many European countries are experiencing.