Fiscal Warning Lights are Flashing

Finance Minister Bill Morneau is busy putting together his first budget. No date has been announced. First budgets, after an election, often don’t turn out well for Ministers of Finance. It is very hard to live up to election promises and escalating expectations. Mr. Martin faced a fiscal crisis in preparing his first budget, and high expectations that he would fix the problem. Despite some significant fiscal actions in the budget, they were seen as “inadequate” in resolving the fiscal crisis. In the 1995 budget, Mr. Martin made sure this would never happen again.

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Fiscal Monitor for April – November 2015

The federal government posted a surplus of $0.4 in November 2015, compared to a deficit of $.6 billion in November 2014.  As a result, there was a surplus of $1.0 billion for the first eight months of 2015-16, compared to a deficit of $3.3 billion in the same period in 2014-15.

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IN SEARCH OF A DOMESTIC GROWTH STRATEGY

Last week the Governor of the Bank of Canada, Stephen Poloz, warned Canadians that they should get used to a low dollar, since this was a normal and, indeed, the necessary response to a global reduction in oil and commodity prices.  The necessary adjustment in the economy from the resource sectors to the non-resource sectors could take at least five years, perhaps longer. Private sector forecasters are starting to recognize this. They are again cutting their growth forecasts for 2016 to below 2 percent.

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Fiscal Monitor for April – October 2015

 

The federal government posted a deficit of $0.9 in October 2015, reducing the surplus for the first seven months of 2015-16 to $0.6 billion, up $4.6 billion from the same period in 2014-15. There has been a significant reduction in the year to date surplus, from a high of $5.2 billion reported for the April to July 2015 period to only $0.9 billion for the April to October 2015 period.  

  

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Improving Transparency and Credibility

 

In the last two weeks, Finance Minister, Bill Morneau, has come under a lot of criticism over the economic and fiscal projections in his November Update and the costing of the middle-income tax cut and the new high-income tax rate.  We offer a few suggestions, which would address these criticisms while improving the transparency and credibility, not just of the budget process but the election process as well.

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BUDGET CONFUSION

If Canadians had wanted a Conservative government obsessed with deficit elimination, they would have elected one. Instead, they elected a Liberal government that committed to running the government’s finances in a “realistic, sustainable, prudent, and transparent manner”.

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