Written by Katie Davis N ow that they, the Liberal government has control of the House of Commons in Canada they have delivered their first federal budget with a promise of government-fostered economic growth. FinanceMinister Bill Morneau far exceed a “modest” $10 billion deficit that was a major part of Liberal election platform during last Fall’s campaign, elevating the Liberals from third-party status into power with amajority gov- ernment and mandate. We can expect higher deficits throughout this Liberal mandate as all this gov- ernment spending takes its toll on the budget balance, as this current Liberal offering will add almost $12 billion to the federal deficit in 2016-17 alone, bringing it to $29.4 billion.
The Liberal election campaign promised modest deficits of $10 billion annually to fund infrastructure spending, with a return to balanced budgeting by the next election, expected in 2019. However, Morneau’s budget speech emphasizes that by the time of the next election, Canada’s debt-to-GDP ratio, a measure of how affordable Canada’s deficit spending is relative to the strength of the economy, should be lower than it is today, albeit only slightly. According to the 2015 Liberal election platform, “We have two fiscal anchors that guide our overall fiscal framework” — reducing the federal debt-to-GDP ratio annually until reaching 27 per cent in 2019-20, when the party promised a return to budgetary balance.
24
SPOTLIGHT ON BUSINESS • APRIL 2016
Made with FlippingBook - Online magazine maker