Liberal budget on track to be worst since 1982: Ex-BoC governor Dodge

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He hasn’t even laid eyes on Finance Minister Chrystia Freeland’s federal budget, but former Bank of Canada governor David Dodge is suggesting that it is “likely to be the worst budget” in more than 40 years.

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“I think this is likely to be the worst budget since the (then-finance minister Allan) MacEachen budget of 1982, in the sense of pointing us in the wrong direction as to how we go about raising the incomes of Canadians and actually making Canadians feel better over the medium term,” Dodge said in an interview with CTV News Channel’s Power Play with Vassy Kapelos. “We’re going in exactly the wrong direction.”

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Prime Minister Justin Trudeau has promised to spend billions of taxpayer dollars to tackle the housing crisis, expand child care, boost the military, grow the country’s artificial intelligence capacity, set up a national school food program, add resources towards providing more mental health care for young people and expand child care.

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But to help finance all of this, critics have speculated that the Liberals could raise taxes on individuals and wealthy corporations.

“Something doesn’t add up. I think there’s a big question of how much of all that promised spending is going to be booked into this year and next year, and how much is going to be deferred?” Dodge told Kapelos.

“I think there is a very real possibility that they’ll do exactly the wrong thing and tax the very folks and the very corporations that are going to make the investments that will actually raise income over time.”

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Conservative leader Pierre Poilievre used Dodge’s damning words to slam Freeland’s federal budget.

“Even Liberals are starting to speak out. Today, proud Liberal and former Bank of Canada Governor David Dodge, who worked for (Paul) Martin and (Jean) Chretien, has said that this budget is on track to be the worst since 1982 as Trudeau doubles and triples down on the costly failures that have left Canadians hungry and without homes,” Poilievre told reporters Tuesday morning.

“We’re stuck with this costly coalition for a year-and-a-half, it looks like,” he continued, taking a swipe at the alliance between Trudeau’s Liberals and NDP Leader Jagmeet Singh. “There will be an election where Canadians will choose between the costly coalition of the NDP and Trudeau — who tax your food, punish your work, take your money, double your housing costs and unleash crime and chaos in your community — or common sense Conservatives, who will axe the tax, build the homes, fix the budget and stop the crime.”

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Last week, Jean-Francois Tardif, founder and portfolio manager at Timelo Investment Management, warned that if Canada doesn’t fix its issues around inflation and affordability the Canadian loonie could sink to 50 cents US.

“I think (the Canadian dollar) could easily go to 50 cents,” Tardif told BNN Bloomberg. “If we keep going the way we’re going, the Canadian dollar is going to go down substantially … We have here in Canada a housing affordability (issue). And we have wage pressure because people can’t afford houses. The price of everything is up… so people are going to ask for higher wages which creates higher inflation. Higher inflation means that the economy is not doing as well.”

A depressed economy, Tardif added, is less attractive to investors. “If they see a weaker economy, which is already happening right now, it means investors will be less interested in investing here … It’s not going to happen overnight, but it’s a slow erosion that could happen if we don’t change this trend.”

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The loonie hit an all-time low back in 2002 when it sank to 61.79 cents US. As of late Tuesday morning, the loonie stood at 72.30 cents US. 

Freeland is expected to present the federal budget at around 4 p.m. in the House of Commons.

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