The fiscal update shows a deficit lower than expected

Liberals have found a financial windfall amid an economic rebound, though there is much talk of additional space thanks to the COVID-19 measures and relief for flooded British Columbia.

Finance Minister Chrystia Freeland’s update, released Tuesday, which delivered virtually due to COVID-19 concerns, shows that this year’s deficit is on track to reach $ 144.5 billion, down from the previous forecast. of a government deficit of $ 154.7 billion.

The better-than-expected result comes from billions in new tax revenue and higher oil prices that gave the government $ 38.5 billion in additional spending space.

But the update shows how quickly that extra space has been consumed by $ 28.4 billion in new spending and previously promised expenditures from the April federal budget.

Among the new measures are $ 5 billion to help rebuild British Columbia after the devastating floods and $ 4.5 billion to respond to the Omicron variant of COVID-19, including measures that lie ahead at the border and the benefits for workers subject to a shutdown.

There are millions more to improve ventilation in schools, libraries, hospitals and community centers, and a tax credit for companies that pay for upgrades.

There is also $ 742.4 million set aside to help some 200,000 low-income seniors recover from drops in the value of their supplemental guaranteed income payments after receiving emergency assistance last year. Payments are not expected to be made until next May.

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Freeland told reporters ahead of the document’s release that Tuesday’s update was not the master plan for the Canadian economy going forward. That comes in next year’s budget, he said.

It is in next year’s budget that the government could outline tens of billions of dollars in pledges for liberal elections.

Robert Asselin, senior vice president for policy at the Business Council of Canada, said there are several big spending on the horizon that could put pressure on the federal books for years to come without a big increase in economic growth.

That would include paying off the liberal campaign promises, the transition to a green economy, increased healthcare transfers to the provinces, as well as any new wrinkles in the COVID-19 pandemic.

“They have provided the support that was needed on both the business side and the income support side,” said Asselin, a former budget chief for the Trudeau Liberals.

“But they have also spent a lot of money … that is not related to COVID, and it will be difficult to sustain over time without great growth.”

The economy has been on a roller coaster ride since the start of the pandemic, including a historic drop that sent the deficit in the last fiscal year to a record $ 327.7 billion.

That was lower than originally thought due to higher tax revenues and after officials changed how much the government could pay First Nations children affected by the child welfare system. The government has now deposited $ 40 billion, half for system improvements and the other half to compensate victims.

After a recent rebound, the government now expects the economy to grow 4.6 percent this year.

While growth is faster than expected in the next two years, it is expected to return to pre-pandemic levels once the crisis passes, which Asselin said may not be enough to pay for the $ 78 billion in new spending. that the liberals promised in the future. campaign trail.

The unemployment rate in November nearly reached its pre-pandemic reading of 5.7 percent in February 2020. The Finance Department expects the country to return to that rate in 2023 based on the revised outlook.

The inflation outlook has also been revised upwards based on the budget. The government now expects the consumer price index to rise 3.3 percent this year and 3.1 percent next, before approaching the Bank of Canada’s two percent target in 2023.

Despite that expected course correction, NDP leader Jagmeet Singh said that liberals should have done more to support struggling Canadians, the hardest hit by the high rate of inflation.

“Supporting the people is something that we cannot afford not to do. We have to implement it,” he said.

Conservative leader Erin O’Toole accused liberals of ignoring the rising cost of living, saying that as prices rise, so does the amount of taxes collected by the federal coffers.

“Canadian family budgets are maxed out and Mr. Trudeau is benefiting from inflation,” O’Toole said.

And Québec bloc leader Yves-François Blanchet chided Trudeau’s liberals for closing the door on a provincial request to increase spending on health care during, not after, the current health crisis.

Freeland had originally planned to deliver the update in person, but made a cautious change of plans after two members of his team tested positive for rapid antigen tests.

She told a virtual press conference that the need to “drive economic growth and competitiveness” is imperative in post-pandemic Canada.

“Climate change, housing, affordability, growth and competitiveness – these are things we are committed to working on,” Freeland said.

“But this is not a budget. And it is not a mini-budget. Really, the intention here is clear and transparent accounting of where the Canadian economy and Canadian finances are today.”

This Canadian Press report was first published on December 14, 2021.