The Trudeau government is dedicating about a third of the windfall it’s expecting from Canada’s surprisingly strong economy towards investments, tax relief and new spending on social programs to support children and the working poor.
Finance Minister Bill Morneau released a fall economic statement Tuesday that promises $14.9 billion in fresh spending over the next five years — on top of what it had outlined in its March budget.
The new measures take advantage of this year’s unexpectedly robust economic performance, which is projected to provide an additional $46.6 billion for its bottom line over the same five-year period.
“As we invest directly in Canadians and their families, we have an immediate impact on the economy,” Morneau said in his speech in the House of Commons. “Our strong fiscal position allows us to do what other countries would like to do, but can’t afford to do.”
The remaining funds will be aimed at reducing annual deficits, which are projected to shrink each year starting in 2018-19 — although a timeline for when the government plans to balance the federal books remains elusive.
Instead, the governing Liberals will press ahead with their deficit-spending approach, with a focus on lowering the debt-to-GDP ratio, a measure of Ottawa’s debt burden.
Finance Minister Bill Morneau spoke with CityNews Parliament Hill Bureau Chief Cormac Mac Sweeney about the Liberal’s decision to focus on spending, rather than paying down the deficit. Watch below.
Morneau also announced Tuesday that the government will introduce an enhancement to child-benefit payments so they start rising with the cost of living two years earlier than initially promised — at a cost to government of $5.6 billion over five years.
He credited the government’s child-benefit program for helping lift the economy.
“Now, with a little more wind in our sails, we’re doubling down on a plan with proven results,” he said in his speech.
He will also bolster the working income tax benefit, a refundable credit aimed at providing relief for low-income Canadians who have jobs and encouraging those who don’t to join the workforce. The measure is projected to lower government revenues by $2.1 billion over five years, starting in 2018.
As it hits the mid-mandate mark, the Liberal government is in far better fiscal shape than it was in its March budget.
The economy has seen an average annualized growth rate of about 3.7 per cent over the last four quarters, which more than doubles the Bank of Canada’s estimate for that period. The government’s survey of private-sector economists predicts growth of 3.1 per cent this year, 2.1 per cent next year and 1.6 per cent in 2019.
The government is now expecting to run a shortfall of $18.4 billion in 2017-18, compared with a projection of $25.5 billion outlined in the budget. For 2018-19, Ottawa is predicting a $15.6-billion deficit, compared with the $24.4-billion projection last spring.
The update also accounted for some adjustments the government announced last week to its package of tax proposals, including the fiscal impact of its promised tax cuts for small businesses.
However, the framework has yet to account for additional revenues the government is expected to rake in once it moves forward with its proposal to limit the use of passive income investments within private corporations. The reform could eventually provide billions in extra revenue for Ottawa.
The Liberals are surely hoping that the good economic news in the update will take some of the public scrutiny off their embattled finance minister.
Morneau has been preoccupied of late with fending off conflict-of-interest accusations largely related to his multimillion-dollar corporate holdings.
In hopes of quieting accusations linked to how he handled his personal fortune upon entering public office in 2015, Morneau pledged last week to sell at least $21 million worth of stock and place his other assets in a blind trust.
Opposition MPs have also called on the former businessman to disclose whether he recused himself from making decisions on pension legislation that they allege will likely benefit his former human resources company, Morneau Shepell.
It’s not the only controversy Morneau has wrestled with in recent weeks.
He was busy last week promoting the government’s efforts to address widespread complaints about the controversial package of proposed small-business tax reforms. Morneau was forced to tweak and even back off some of the proposals after an angry backlash from doctors, farmers, tax experts and even Liberal backbench MPs.