Liberal Finance Minister Bill Morneau announced an $18.4-billion deficit Monday morning, blowing past the government’s campaign promise of keeping the bill below $10 billion.
The fiscal update was widely anticipated to include bad news. Growth forecasts are indeed down, Morneau acknowledged during a town-hall style presentation. The minister blamed global financial headwinds, but also the former Conservative government.
“After 10 years of weak growth, band-aid solutions … Canada was simply too vulnerable,” he said.
The Conservatives have maintained they left a $1.2 billion surplus on the books when they left office last fall.
“Short-term deficits will be larger than expected,” Morneau noted. “Our priority is to solve these challenges for Canadians in the long-term.”
A look at the federal deficits and surpluses from 1990 to 2015
The minister also said he expects “the cries will get louder in the coming weeks” but that the federal budget on March 22 won’t represent a “knee jerk reaction” to the current fiscal situation. The stimulus investments promised by the Liberals will move ahead on schedule, he said.
“We’ll be acting out of reason … This is Canada. We’re going to dig out together.”
Interim Conservative leader Rona Ambrose called the plan “reckless” and “irresponsible”
“When it comes to spending other peoples’ money, the Liberals seem to not be able to help themselves,” Ambrose said.
“This is not a plan for job creation, nor it is a plan to control spending. This is a recipe for waste.”
Ambrose defended her own party’s deficit spending in recent years, arguing that the country is not yet in recession as it was in 2008. She said the current government should only be spending on “programs that create stimulus,” acknowledging that this could include infrastructure investment.
Ottawa should also be sending better signals to the business community, Ambrose added, encouraging private-sector investment by backing pipeline projects, holding off on any new taxes and ratifying the Trans-Pacific Partnership agreement.
Here are some of the major points from this morning’s fiscal update from the department of finance:
The Liberals have been forced to blow through their promised $10-billion deficit ceiling. The deficit spending for the coming year will instead top out at $18.4 billion, the government confirmed Monday. The fall economic update had projected a $3.9-billion deficit for 2016-2017. Getting back to balance by the end of the Liberal mandate, as promised during the election campaign, is also unlikely. The projected deficit for 2017-2018 is now $15.5 billion, more than six times the estimate last fall of $2.4 billion.
The budget will be tabled March 22
There had been speculation that the budget would land early in the spring, with the week of March 21 widely predicted to be the most likely contender. The finance department confirmed that March 22 has been chosen as budget day. None of the numbers released on Monday include the measures that will be announced in the budget. These are expected to include several billion dollars in infrastructure spending, which could easily push the deficit over $20 billion.
The price of oil
Private-sector economists are now predicting an average crude price of US$40 a barrel in 2016, down from US$54 in the fall economic update. The downgraded forecast is likely to continue to have significant fallout in Canada’s energy sector.
Gross Domestic Product
GDP growth is forecast to be 1.4 per cent, as compared to two per cent last fall, resulting in a $12-billion loss in government revenue. Morneau said no tax changes are being considered at this time to compensate for the shortfall.