Canadians will soon receive an update on the health of federal finances and the government’s outlook for an economy facing high rates of inflation, flooding in British Columbia, and the emergence of a new variant of COVID-19.
Finance Minister Chrystia Freeland will deliver the update on December 14, just three days before MPs are scheduled to leave Ottawa for a winter break.
Federal finances have taken a beating during the pandemic as the Treasury pumps out unprecedented aid. The government predicted that the deficit for the last fiscal year would be $ 354.2 billion and almost $ 155 billion this year.
Higher oil prices, among other economic factors, are expected to fill in the government’s results. UBC economist Kevin Milligan estimated that the additional wiggle room could be as much as $ 10 billion, giving the Liberals a budget respite just after the middle of the fiscal year.
“Our administration’s focus is to end the fight against COVID and support our recovery from the COVID recession,” Freeland said in the House of Commons on Thursday. “We know that it is important for Canadians that we are careful and transparent about our nation’s finances.”
Shortly after Freeland spoke, MPs voted to send the Liberals’ latest aid package for a committee review, likely Monday.
Freeland will face a two-hour barbecue on the $ 7.4 billion plan to provide support to workers affected by the lockdowns and targeted aid to businesses hardest hit.
Politically, the New Democrats are seeking more spending on aid to workers after benefits were cut, and Vice President Alexandre Boulerice chided the Liberals for being “completely disconnected” from the needs of Canadians.
Conservative financial critic Pierre Poilievre chided the government for releasing an economic update with just days to go before the House of Commons, and said his party wants liberals to cut spending to pre-pandemic levels to help with the cost of life. worries.
Liberals promised to spend $ 100 billion on stimulus and pledged billions more in the election campaign, fueling warnings from experts that overspending could fuel inflation by increasing consumer demand at a time when that the supply of goods cannot keep up. .
With inflationary pressures mounting, Liberals will give a #budget update on December 14. #CDNpoli
“It seems to me that you combine this with all the savings Canadians have right now and that’s a lot of money in the economy in the short term,” said Robert Asselin, senior vice president for policy at the Business Council of Canada and a former liberal budget chief. .
“You just have to be careful not to drive more consumption, more demand and worsen inflation.”
Rebekah Young, Scotiabank’s director of fiscal and provincial economics, said it would make sense to contain most of the additional $ 53 billion in new net spending committed in the campaign, at least for now until inflation rates start to decline.
“I hope this expense still has a good chance of seeing the light of day, but not before the holidays,” Young said.
She said messages coming out of the Finance Department point to a minimalist update rather than one with many new spending measures.
Instead of spending, liberals are asked for details on how to address supply chain issues that have helped drive the inflation rate to an 18-year high, which was not in the government’s perspective on the budget. of spring.
“It is important for them to establish what their strategy is to deal with these changing circumstances,” said Perrin Beatty, president of the Canadian Chamber of Commerce.
The government’s response to inflation has been to target its national child care strategy, which aims to cut rates in half on average for next year, and its promises to spend more to make housing more affordable.
Asselin said spending on child care, while useful, will not address the scale of inflation problems now. He also said liberals may not be able to address many of the vulnerabilities in the housing sector, noting that there is little the government can do once you own a home and have a mortgage.
Milligan, in an analysis for the CD Howe Institute, suggested that the government not add too much debt to “preserve borrowing capacity for future crises” and prepare for the additional costs associated with an aging population.
This Canadian Press report was first published on December 2, 2021.