OTTAWA—The federal government is projecting a deeper budget deficit for the coming years, even before it accounts for the bulk of the platform promises the Liberals made during this fall’s general election.
In the fall fiscal update unveiled Monday, Finance Minister Bill Morneau revealed that the expected deficit for the 2019-20 fiscal year has ballooned to $26.6 billion, including a $1.5 billion “adjustment for risk” fund. That’s up from $19.8 billion in the red that was projected in last winter’s 2019 budget.
Since then, the government raised $1.7 billion more than it expected, but spent an additional $5.8 billion on a range of programs.
The fiscal document explains the bulk of the bigger deficit comes from added spending on employee pensions and benefits, which becomes more expensive when interest rates are expected to drop.
The new fiscal picture includes the “middle class tax cut” the Liberals tabled earlier this month, the first policy measure since they were elected to a minority government on Oct. 21. That cut, which raises the amount of money Canadians can earn that isn’t subject to income tax, will cost Ottawa $700 million in the current fiscal year, rising to $3 billion in 2020-21 and eventually $6.2 billion in 2024-25.
The bigger budget hole does not include almost $9 billion in projected spending from other Liberal promises described in the party’s election platform. It also does not address the prospect of larger federal transfers to the provinces and territories, as premiers are demanding more health funds and fiscal stabilization from Ottawa ahead of a meeting of finance ministers later Monday.
The document notes, however, that Canada’s net debt-to-GDP ratio remains the lowest in the Group of 7, at 31 per cent, and is projected to drop each year to 29 per cent in 2024-25.
Overall economic growth — measured by real gross domestic product — is expected to clock in at 1.7 per cent this year, slow slightly to 1.6 per cent in 2020, and jump to 1.8 per cent in 2021.
The fiscal update surveys global trends that it says are slowing growth across the world, with rising protectionism throttling the free flow of trade, and China posting its weakest GDP increases since the early 1990s.
This has weighed on Canadian exports and business spending, the fiscal update says. At the same time, however, roughly 400,000 jobs have been created so far this year — even after 71,000 were lost in November — and wage growth is exceeding 3 per cent, meaning “2019 could mark the strongest year of wage growth in close to a decade.”
Get more politics in your inbox
Make sense of what’s happening across the country and around the world with the Star’s This Week in Politics email newsletter.