Federal Economic Update To Focus On Lower Deficit, New Spending Measures

The Liberal Government of Prime Minister Justin Trudeau is expected to announce Tuesday a lower federal deficit and new funding for children and the working poor in its fall economic update.

The economic update, delivered each autumn, comes after several weeks of controversy involving the federal government’s proposals to alter the tax code – a move that angered small business owners and Bay Street executives alike – as well as personal controversy involving Finance Minister Bill Morneau’s personal assets and overseas business interests.

Described by sources within the Liberal Government as a “campaign style” announcement, the economic update is expected to show an improving fiscal outlook in the coming years, even though Ottawa also plans to announce new spending measures alongside its updated forecast.

Minister Morneau is expected to enhance the Canada Child Benefit, which the government boasts has lifted 300,000 children out of poverty. The child-benefit change will come through indexation, one government source told The Toronto Star newspaper. The benefit is currently not indexed to inflation, which means it does not increase with the cost of living. Research by the Parliamentary Budget Officer has found that indexation would have a net cost to the federal treasury of $300 million in the first year of implementation, rising to nearly $5.8 billion in the seventh year.

Sources said Morneau will also bolster the Working Income Tax Benefit, a refundable tax credit aimed at providing tax relief for low-income Canadians who have jobs and encouraging those who don’t have jobs to join the workforce. But despite the new spending and the economy’s surprisingly strong performance in recent months, the Finance Minister still isn’t expected to provide a timeline to bring the federal books back to balance.

Some economists have predicted that the current economic growth will provide the federal government with an additional $10 billion on its bottom line in each of the next couple of fiscal years, compared to the federal forecasts in the March budget. This past spring, Ottawa projected deficits of $25.5 billion for 2017-18 and $24.4 billion for 2018-19.