SOBApril2016

SO BUDGET DAY 2016 HAS COME AND GONE, SO LET’S TAKE A LOOK AT WHAT IS IN IT FOR CANADIAN BUSINESS. Trudeau and his government are now, all in, betting heavily on funding a growth agenda for the economy. While many of the projects named in the budget are targeted for spending over the next two years, it also includes projects the government will spend on over longer time frames. The promise to spend on infrastructure was a centrepiece of the Liberals’ 2015 election campaign platform. The party pledged to spend $125 billion over 10 years in a bid to “kick-start” the Canadian economy. The 2016 Budget expanded an existing $65-billion program the Liberals inherited from the previous Harper Conservative government. In this Budget, the Liberals will spend some $3.4 billion over the next three years to upgrade and improve public transit across the country. Money to be allocated to provinces and territories based on their share of national public transit ridership. Another $5 billion was set aside over the next five years to go to water, wastewater and so-called “green” projects designed to respond to climate change. That includes $2.2 billion for clean water, waste water and waste management in First Nations communities. $3.44 billion has been set aside to build social projects, such as subsidized housing, rec- reation centres and daycares. Plus Trudeau and his government want to continue to have talks with Canada’s premiers to develop strategies for positioning Canadian cities to be more competitive internationally however; The 2016 Budget does not change the corporate tax rate for small businesses, a move much-discussed during the fall election campaign. As for military spending, the Federal Budget does reallocate $3.7 billion for large-scale capital spending planned for the Canadian military between 2015-16 and 2020-21, pushing it off to later years. However, the government argues this is not a reduction in the Defence Department’s budget, but a shifting of the spending forward to the years when the military expects to be ready to make these purchases.

Morneau’s most recent pre-budget projections have debt-to-GDP rising to 31.8 per cent next year (from 31.0 per cent in 2015-16). As for balanced books in 2019-20, Trudeau has called it a “difficult” challenge. “Difficult” is a good word to use when speaking of deficit figures as they fail to capture how the Canadian economy is doing. The federal deficit calculations are based on economic growth forecasts. The Liberals have taken a more pessimistic view of these forecasts compared to the private sector forecasts from February. We must understand that the government has only so much control over the factors that go into determining the debt-to-GDP ratio. It ultimately decides how much money it piles onto the country’s debt by running a deficit (or pays down by running a surplus), but it doesn’t directly control how much the economy grows or what interest rates are.

Previous to the release of the budget Trudeau said in the House of Commons, “Confident, optimistic economies are willing to invest in their future, in their children’s future.” What we must ask ourselves is; are we investing in our future or mortgaging our present, only time will tell if the right decision was made.

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APRIL 2016 • SPOTLIGHT ON BUSINESS

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