Ottawa plans to return to balanced budgets within five years

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Ottawa plans to return to balanced budgets within five years

Watch Federal Finance Minister Chrystia Freeland's presentation of the economic update.

Thanks to the significant revenues generated by inflation, the federal Minister of Finance, Chrystia Freeland, predicts, in her Fall Economic Statement, a return to a balanced budget, and even a surplus, during the 2027-2028 fiscal year.

For the first time since coming to power, the Trudeau government is thus able to give a relatively close forecast of a return to balanced Canadian public finances.

In the economic update tabled this afternoon in the House of Commons by the Minister of Finance, Chrystia Freeland, we learn that the government's budget balance should move into the positive zone within five years.

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Under the government's baseline scenario, the fiscal deficit is projected to reach $36.4 billion this year, well below the $52.8 billion projected in the last budget . The shortfall in public finances should continue to decline until 2026-2027, before a first surplus of 4.5 billion the following year.

The most pessimistic economic scenario adopted by Ottawa, on the other hand, predicts that the country will still be in deficit by 8.3 billion dollars in 2027-2028.

Always according to the forecasts of the Ministry of Finance, Federal net debt, which is currently valued at $1,177.3 billion (42.3% of GDP), is projected to climb to $1,251 billion in 2026-27, before declining to $1,246 billion in 2027-28.

Given the growth of the economy and government revenues, the debt is then expected to be only 37.3% of GDP, which would still be one of the best performances, if not the best, of the G7.

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However, despite the relatively good health of the economy and a labor market that she considers solid, Minister Freeland is nevertheless preparing for an economic slowdown. At issue: the six consecutive increases this year in the Bank of Canada's key rate, in order to contain the inflationary outbreak that is hitting Canadians' wallets hard.

The Federal Ministry of Finance forecasts GDP growth of 3.2% this year, which is indeed expected to slow to 0.7% in 2023 before picking up to 1.9% in 2024 and 2.3% in 2025. /p>

“Canada cannot avoid the coming global slowdown, just as we could not have prevented COVID -19 to reach our shores once it started infecting the world. But we will be ready.

—Chrystia Freeland, Deputy Prime Minister and Minister of Finance

The price of the grocery basket is hit hard by inflation, which is slow to subside.

It's no longer a secret that the inflationary outbreak of recent months is forcing a growing number of Canadians to make increasingly difficult choices in the face of skyrocketing energy, grocery and housing bills.

But despite the growing financial difficulties of Canadian households, the Trudeau government must carefully balance its interventions so as not to contribute itself to the overheating of the economy by paying a overly generous monetary assistance to too many Canadians.

That's why Minister Freeland is announcing a new package of very targeted, if not modest, measures to primarily help those Canadians who need it most to absorb the inflationary shock.

So students and apprentices will be happy to hear that Ottawa will permanently abolish the federal interest portion of student loans.

The Minister is also accelerating the payment of the Canada Workers Benefit – currently on an annual basis – by establishing a quarterly payment in order to get this money to the lowest paid workers more quickly. Ottawa plans to pay more than $4 billion over six years in advance payments beginning in 2022-23.

“We will be able to invest in the Canadian economy and be there for Canadians who need it most, because we were cautious in April and because we are cautious today. »

— Chrystia Freeland, Deputy Prime Minister and Minister of Finance

These announcements are in addition to federal economic relief measures previously announced by the Trudeau government, including the Canada Dental Benefit, the creation of a tax-free savings account for the purchase of a first property (TFSA) or the payment of double the credit for the goods and services tax (CTPS) for six months to Canadians who benefit from it .

Ottawa is also committed to reducing credit card transaction fees for small businesses.

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Although it is not announcing any new tax or tax increase for taxpayers, the Trudeau government intends to increase the contribution of companies by introducing a tax that will apply to share buybacks by established public companies. in Canada.

This tax is Canada's response to US President Joe Biden's Inflation Reduction Act, which also includes a federal tax 1% reduction on corporate share buybacks.

The government also intends to strengthen private investment to reduce Canada's GHG emissions by establishing a new growth and by introducing investment tax credits, important for clean technologies and clean hydrogen.

The package of aid measures from the Fall Economic Statement total $6.1 billion this year. These are in addition to the $7.3 billion in economic assistance announced since Budget 2022.

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