Fall Economic Statement: Full Coverage

Fall Economic Statement: Full Coverage

With COVID-19 continuing to surge across the country, Chrystia Freeland is set to deliver her first update as Canada’s first female finance minister — the first major federal fiscal document since the March 2019 budget, and a look at how the Trudeau government hopes to navigate the second wave and foster an eventual economic recovery.

Freeland will face 10 minutes of questions and comments from MPs after her speech on Monday, Nov. 30 at 4pm ET / 1pm PT. Each opposition party (and the Greens) will be allowed a right of reply and question period of similar length.

Watch Freeland’s address to the House of Commons and follow CPAC and cpac.ca for extensive coverage — including PrimeTime Politics with Peter Van Dusen and L’Essentiel with Esther Bégin.

The COVID-19 pandemic caused a postponement of the federal budget planned for March 30. But former finance minister Bill Morneau provided a fiscal “snapshot” in July, including a projected $343.2-billion deficit, representing 16% of Canada’s total GDP – a level unseen since the Second World War.

That was 10 times larger than the previous year’s shortfall, in what Morneau called a testament to the economic shock of COVID-19. The number included $228 billion in emergency spending (including the federal wage subsidy and Canada Emergency Response Benefit), and a $71-billion decline in tax revenue.

The federal debt-to-GDP ratio, for years the Trudeau government’s key fiscal anchor, was slated to rise to 49%. But the government argued the increased debt load was manageable through reduced charges and more long-term 10- and 30-year bonds.

Private-sector economists projected a 6.8-per-cent economic contraction in 2020, the largest drop since the Great Depression, followed by a potential 5.5-per-cent rebound in 2021.

But the government declined to provide a more detailed fiscal update this past summer, citing the economic uncertainty caused by COVID-19. And billions of dollars in additional spending have since been announced or proposed, including new and updated COVID-19 support programs for individuals and businesses.

Meanwhile, the C.D. Howe Institute estimates that the promises from September’s speech from the throne could add between $19 billion and $44 billion to annual federal spending. That speech included pledges of:

  • collaboration with the provinces and territories “to set new, national standards for long-term care so that seniors get the best support possible” and “take additional action to help people stay in their homes longer”
  • increasing Old Age Security for those 75 and above, and more targeted measures for personal support workers
  • a “significant, long-term, sustained investment to create a Canada-wide early learning and childcare system”
  • “further support” for hard-hit sectors such as travel and tourism, hospitality, and arts and culture
  • efforts to create one million jobs as part of a more resilient economy that empowers women, fights climate changes, and tackles systemic racism. (National child care could bring between 363,000 and 726,000 women into the workforce over 10 years, including 250,000 women in full-time jobs, according to a recent report from the Centre for Future Work.)

That same month the parliamentary budget officer projected a $329-billion deficit, falling to $74 billion in the 2021-22 fiscal year. But that assumed a “slow burn” scenario with no further economic shutdown or major spike in COVID-19 cases.

And in October, the Bank of Canada projected “markedly” slow growth for the rest of the year and kept its key interest rate at a record-low 0.25%, thanks to rising infection rates:

The economic effects of the pandemic are highly uneven across sectors and are particularly affecting low-income workers. Recognizing these challenges, governments have extended and modified business and income support programs.

After a decline of about 5 ½ percent in 2020, the Bank expects Canada’s economy to grow by almost 4 percent on average in 2021 and 2022. Growth will likely be choppy as domestic demand is influenced by the evolution of the virus and its impact on consumer and business confidence. 

And so observers — and the opposition parties — will be looking closely at the Finance department’s own deficit projection, debt forecast, economic benchmarks, and the accounting of COVID-19 spending to date — and what those numbers might say about the government’s ability or willingness to spend more going forward.

-Andrew Thomson