Finance Canada has already reported the 2021-22 deficit at $90.2 billion -- $24 billion less than projected in last spring's budget thanks largely to a post-lockdown recovery recovery generating higher-than-expected tax revenue.
Canada's debt-to-GDP ratio was 45.5% for 2021-22, one percentage point lower than the budget projection. (Total federal debt was $1.13 trillion by fiscal year's end.)
The Finance department wrote in October that:
The economic outlook heading into the last few months of 2022 appears increasingly uncertain and Canada would not be immune from potential setbacks. There are growing concerns that the global economy is becoming more fragile, with signs suggesting that growth in many leading economies is slowing. Moreover, the Russian invasion of Ukraine is still a critical source of macroeconomic risk six months after its onset.
Meanwhile, key manufacturing and industrial sectors warn the massive U.S. Inflation Reduction Act will lure capital and jobs from the Canadian economy – and there are calls to compete with the Biden administration’s climate incentives and green spending expected to reach $369 billion over 10 years.
Freeland told a Washington audience that Canada and other democracies must unite to resist “muscular dictatorships” and chart a new path that navigates a “moment of dramatic economic upheaval.”
This “friendshoring” would include vital supply chains. And for Canada, “generosity in fast-tracking ... the energy and mining projects our allies need to heat their homes and manufacture electric vehicles.”
Freeland also warned domestic audiences in October to expect difficult days ahead as higher interest rates affect the economy and the cost of living.
And despite the federal government's "running a tight fiscal ship," the minister cautioned:
We can’t support every single Canadian in the way we did with the emergency measures that we put in place at the height of the pandemic. We cannot compensate every single Canadian for all of the costs of inflation driven by a global pandemic and by Putin’s invasion of Ukraine.
Freeland has pointed to enhanced benefits as one response to affordability concerns. And the government’s fall legislative agenda already included cost-of-living measures forming part of the Liberal-NDP confidence and supply agreement:
- a six-month doubling of the GST/HST credit for low- and modest-income Canadians;
- the first phase of national dental care for children under 12 in households with a family income below $90,000;
- a top-up of the $500 Canada Housing Benefit established as a one-time payment.
Statistics Canada measured the September inflation rate at 6.9%, a slight drop mainly attributed to lower gas prices. However, grocery prices were up 11.4% compared to September 2021: the highest increase since 1981.
For its part, the Bank of Canada warns inflation has peaked but remains too high. That labour mortgages and too much demand is hobbling the economy. That the housing market has "fallen sharply." And, that growth will "essentially stall" over the next several months.
Those combined factors led the bank to again raise the overnight rate last week and warn that more increases are likely needed as more experts are using the word "recession" for 2023.
Conservatives accuse the government of inflationary overspending, fuelled by the Bank of Canada’s quantitative easing program, that has produced a housing bubble and a major rise in prices. They want a freeze on increases to Canada Pension Plan and Employment Insurance premiums – along with planned 2023 increases to the federal carbon-pricing backstop.
Opposition Leader Pierre Poilievre is demanding the government find savings to account for any new spending – and continues to argue for less “gatekeeping” that stifles economic growth and upsets the supply/demand equilibrium.
Inflation is at a 40 year high. Interest rates rising at the fastest rate in decades.
— Pierre Poilievre (@PierrePoilievre) October 30, 2022
The bubble is bursting, and the bill coming due.
Minister Freeland, there’s only one way to reverse course:
Stop the tax hikes.
Cap government spending. pic.twitter.com/N9mym9SICw
New Democrats want action to prosecute price fixing, introduce a windfall tax on corporate profits, remove the GST from home heating costs, reform the Employment Insurance system, and quicken spending plans for green energy, housing, and infrastructure.
"These are the general themes, the fact that Canadians are hurting and they need some respect right now to be able to get through the next period of time," says NDP Leader Jagmeet Singh as he lays out his party's priorities ahead of Thursday's fall economic statement.#cdnpoli pic.twitter.com/HUkbknFuou
— CPAC (@CPAC_TV) November 1, 2022
And the Bloc Québécois has called for increased Old Age Security payments, more low-income financial support, and more health transfers without conditions.
Le porte-parole du Bloc en matière de Finances, Gabriel Ste-Marie, fait part des revendications du parti en vue de l'énoncé économique automnal soit réforme de l'assurance-emploi, augmentation des transferts en santé et préservation du pouvoir d'achat des aînés.#polcan pic.twitter.com/PiIjHdcxe3
— CPAC (@CPAC_TV) November 1, 2022
Watch More: PrimeTime Politics
Perrin Beatty, president and CEO of the Canadian Chamber of Commerce, previews the economic and fiscal update:
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Freeland and the Liberal government tabled a budget portrayed as a fiscally responsible plan to encourage economic growth while tackling Canada’s affordability challenges.
The budget included new measures with a net cost of $31.2 billion over the next five years, including major commitments on housing and climate (and $8 billion for national defence).
Fiscal projections improved from the previous December’s update thanks largely to GDP inflation and increased corporate tax revenue (projected for 2021-22 at 45% above 2019-20 levels).
The budget argued that: “all of Canada’s fiscal guardrails—from the unemployment rate, to employment rate, to actual hours worked—have effectively recovered to their pre-pandemic levels.”
But the document noted the uncertainty around Canada’s economy: the war in Ukraine, a potential resurgence of COVID-19, global economic restructuring, and threats to traditional supply chains. And Conservatives accused the government of failing to provide relief to Canadians struggling with the cost of living -- and of failing to outline a path to fiscal sustainability.
Freeland delivered the Liberal government's first major post-election fiscal update amid concerns about inflation and continuing uncertainty over COVID-19 and the Omicron variant.
Conservatives accused the government of overspending and cultivating "runaway" inflation that has raised prices for Canadian families.
NDP Leader Jagmeet Singh wanted housing affordability at the center of federal efforts to address the cost of living, with immediate implementation of new taxes to curb speculation and "massive" investment in new affordable homes. Singh also cited the cost of Internet and mobile phone services.
This followed a speech from the throne calling COVID-19 "priority number one” for the government" at a time Delta variant cases continued to rise but before detection of the Omicron variant in Canada.
The Liberal platform claimed its promises on child care, health care, and housing would raise Canada’s economic growth in a “prudent” overall plan that includes a $15-billion risk provision through the end of 2023.
The platform called for debt-to-GDP ratio to fall from 51.2% in 2021 to 49.2% by 2026, with a major increase in tax revenue.
