While Freeland has promised fiscal prudence in this era of high inflation, the mini-budget proposes new programs to help some of the people hardest hit by rising prices — including students and low-income workers — and to kickstart what he called real, strong industrial policy” to position Canada for future economic growth. Freeland announced that all federal student and apprenticeship loans will be permanently interest-free and unveiled a multibillion-dollar plan to automatically send Canada Workers Benefit (CWB) payments to people who qualified in the previous tax year. The document also includes a plan to match some of the clean energy incentives recently introduced in the United States through the US Inflation Reduction Act, which the government sees as a threat to future investment in Canada. The result: $30.6 billion in new spending over the next six years. The government’s current fiscal health is much better than expected, thanks to higher oil prices and rising personal and corporate taxes. Freeland told the House of Commons on Thursday that the improvement in the federal fiscal picture “didn’t happen by accident.” “It happened because people fought COVID, kept their businesses going, kept working and running,” he said. “And that’s why Canada is in this pretty remarkable position of significantly exceeding our budget projections in April.” WATCH: ‘The economy is slowing,’ Freeland says
“The economy is slowing down,” says Freeland
Finance Minister and Deputy Prime Minister Chrystia Freeland issues her Autumn Economic Statement on Thursday in the House of Commons. Freeland’s spring budget projected a deficit of $52.8 billion for the 2022-23 fiscal year. Now, the fall economic statement projects a deficit of $36.4 billion. That’s still far higher than the $23 billion deficit Ottawa could have posted if it had saved more of its fiscal windfall instead of earmarking it for new programs. Asked whether it was appropriate to spend some of the new revenue with the economy in a precarious state, Freeland said the government “chose to invest on the upside”. The government is juggling two goals, Freeland said: It wants to avoid inflation while supporting people hit hard by the rising cost of living. “We have to strike a balance today between, on the one hand, being fiscally responsible, keeping our dust dry, given the global economic uncertainty, and, on the other hand, being compassionate, providing support to those people who need it” , Freeland said. he told reporters. There is a risk that the $36.4 billion deficit forecast will never materialize. The deficit could end up being much worse – because the economy is on shaky ground. The government fears the economy could slip into recession next year as the Bank of Canada’s aggressive rate hikes significantly slow a once-hot economy. Private sector economists polled by Ottawa forecast real GDP growth of just above zero for the next several quarters. This will push Canada’s unemployment rate from the current 5.2 per cent to 6.3 per cent by the end of next year. The federal government presented what it called a “bearish scenario” for growth and jobs — one in which a recession results in thousands of lost jobs, fewer taxes collected, an increase in Employment Insurance (EI) payments, higher service costs of debt and a dramatically higher deficit: $49.1 billion in 2022-23.
“Our economy is slowing down”
That “downsizing scenario” is not out of the realm of possibility, the government said. In fact, Freeland’s department said Thursday “the balance of risks to the growth outlook is tipping to the downside.” “This is a difficult time for millions of Canadians. It’s important to be honest with Canadians about the challenges ahead,” Freeland said in a speech Thursday. “Interest rates are rising as the central bank steps in to tackle inflation. That means our economy is slowing down.” Conservative leader Pierre Poiliev slammed Prime Minister Justin Trudeau over the budget document, accusing him of engaging in “a massive money-printing orgy.” Speaking in the Commons, Poilievre said it was federal government spending that fueled inflation, driving up the cost of everyday goods. The government maintains the pandemic, supply chain disruptions and the war in Ukraine are responsible for the price increases. Poilievre said Freeland’s “inflationary scheme,” which proposes an additional $6.1 billion in spending for this fiscal year alone, will make matters worse. “Insanity is doing the same thing over and over and expecting different results. Stop the insanity, stop the inflation,” said Polievre, who was not available to answer questions from reporters afterward. ATTENTION: Party leaders, MPs react to the autumn economic statement
Party leaders, MPs react to the Autumn Economic Bulletin
NDP Leader Jagmeet Singh, Interim Green Party Leader Amita Kuttner, Opposition Leader Pierre Poilievre and Bloc Québécois MP Gabriel Ste-Marie offer their views on the mini-budget. He said a government under his leadership would introduce a “pay as you go” law, which would force the federal government to match every dollar of new spending with cuts elsewhere. “We’re going to inherit this mess. We’re going to have to fix it. We’re going to have a big job ahead of us, a really big job. He’s going to leave a big mess like his dad left. He’s going to a beach somewhere to surf,” Poilievre said of Trudeau.
“A lot of uncertainty”
A senior government official speaking to reporters on Thursday said there is “definitely a lot of uncertainty. We also see volatility” in the economy. With the Federal Reserve and Bank of Canada determined to reduce inflation through higher interest rates, the official said, Ottawa now expects a “relatively shallow, relatively short recession” for three quarters in 2023. A customer walks into a restaurant with help signs in Laval, Que. Federal officials say Canada’s tight labor market should cushion the effects of an expected recession. (Ryan Remiorz/The Canadian Press) The official also said the country is relatively well-positioned for a slowdown because labor markets are tight – which should keep the unemployment rate lower than it was during the 2008-09 financial crisis – and higher commodity prices are generally “good for the Canadian economy.” To help poorer Canadians deal with the pressure of inflation, Freeland announced the government will rework the current CWB, a refundable tax credit that supplements the incomes of about 3 million workers. The government says it will spend $4 billion over the next six years to automatically issue what it calls “advance payments” to those eligible for the CWB. Recipients will not have to wait until tax time to collect all that is owed. Employees are entitled to the allowance based on their income from the previous tax year. The benefit will provide up to $714 for single workers and $1,231 for a family. The change to the CWB comes on top of other measures recently released by Ottawa for low-income Canadians: doubling the six-month GST credit, supplementing the Canada Housing Benefit and a plan to cover dental expenses for low-income earners under 12 years.
Student loans are provided interest-free
To help students, Freeland announced that the government will make all Canada Student Loans and Canada Apprenticeship Loans permanently interest-free — including those currently being repaid. This $2.7 billion program is expected to save the average student loan borrower $410 per year. The government has also committed another $802.1 million in spending over the next three years for a “youth jobs and skills strategy” that will include around 70,000 annual summer jobs. On the housing file, the government promised on Thursday to table legislation soon to implement the long-promised “tax-free first home savings account”, an initiative first unveiled in the spring budget. Students at Memorial University in Newfoundland are protesting tuition hikes. The federal government makes student loans interest-free. (Patrick Butler/Radio-Canada) This plan combines RRSP and TFSA features. Money added to a tax-free first home savings account would pass through tax-free and could be withdrawn tax-free due to investment gains. The government expects eligible Canadians to be able to open such accounts in mid-2023. To help offset the closing costs associated with buying a home, the government is doubling the first-time homebuyer tax credit to $10,000. This enhanced credit will provide up to $1,500 in immediate support and will apply to homes purchased on or after January 1, 2022.
Playing catch-up in a net zero economy
The government is concerned about the Inflation Reduction Act, a landmark bill recently passed by the US Congress. This bill would free up hundreds of billions of dollars in US federal spending to begin the transition to a cleaner economy south of the border. “It’s a game-changer for climate transition, but it’s also a game-changer for rebuilding America’s industrial structure for the next generation,” the senior administration official said. “It will make the US a world leader in batteries, carbon capture, hydrogen, clean fuels and attract foreign direct investment. It’s a gravitational black hole for capital spending.” U.S. senators and representatives take pictures as President Joe Biden reacts inside a Hummer EV during a tour of General Motors’ Factory ZERO electric vehicle assembly plant in Detroit, Michigan on November 17, 2021. (Jonathan Ernst/Reuters) To keep pace with the US, Ottawa is rolling out two new…
