New numbers from the Finance Department of Finance show the government’s projected deficit is now more than $5 billion smaller than what the budget projected.
The current deficit projection for the 2016-17 fiscal year is $17.8 billion.
The improved projections are largely due to a stronger economy. The government’s news release states nominal GDP growth is the strongest in a decade and the economy has added 400,000 jobs in the past year.
“What the numbers mean is that our plan to grow the economy for the middle class is working,” Prime Minister Justin Trudeau told reporters in Ottawa. “We’re going to stay focused on creating that economic growth.”
But despite the improved economic and deficit forecasts, Trudeau doesn’t appear to have any plans to balance the budget.
Asked twice if the smaller deficit projection meant his government could accelerate or even establish a timeline for eliminating the deficit, Trudeau did not respond directly.
“We continue to work hard to grow the economy,” Trudeau said in response to the question. “The way we’re doing that is by not doing what the previous government did and giving benefits and advantages to the wealthiest Canadians — that led to low growth.”
During the 2015 election campaign, Trudeau promised to eliminate any deficit by 2019, and he also promised deficits would be capped at $10 billion.
Those promises were abandoned with the Liberal government’s first budget in favour of higher spending aimed at generating economic growth and creating jobs.
Repeatedly, the Liberals said a sluggish economy and low interest rates created a perfect storm that necessitated higher spending and bigger deficits.
The Bank of Canada has now hiked its key interest rate twice since July, and as the government itself notes — the economy is performing the best it has in a decade.
Ironically, much of the increased spending was to be directed towards infrastructure but the finance department’s report points out that spending hasn’t all materialized.
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“Program expenses were $3.7 billion lower than expected, reflecting a number of factors, including lower-than expected infrastructure transfer payments,” the report states.
And though Trudeau himself didn’t answer questions about eliminating the deficit, the report outlines why the government likely doesn’t feel pressure to alter its position.
“The federal debt-to-GDP ratio was 31.2 per cent — 0.3 percentage points lower than projected in Budget 2017,” it states, adding the federal government’s total debt to GDP ratio is the lowest among G7 countries.
Whether that’s enough to convince Canadians the deficit doesn’t need to be balanced remains to be seen.