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Budget Preview – Tax Details Watched To Counter New Spending [1/2]

CANADA
  • The federal government’s Budget 2024 is released tomorrow from 1600ET.
  • A steady reveal of new spending pledges (heavily skewed towards housing but also covering healthcare, military spending and AI) has reduced scope for surprises with a greater focus on the revenue side and tax plans in order to try and keep close to previous guidance.
  • However, writing five days ahead of the Budget, Scotiabank tallied C$43bn of major new spending with about C$26bn having a budgetary impact, but saw a final budget day toll of around C$31bn over the forecast horizon so further spending pledges can’t be ruled out. They see this as being worth circa 0.2pps of GDP annually on a backdrop of already strong government spending.
  • TD estimate a budget deficit of C$41bn (1.4% GDP) for FY24/25. “We will gladly concede that the risks around the deficit skew higher, but our working assumptions are as follows: a) the next election will not be held until fall 2025, as the Liberals have no incentive to call an earlier election given current polling, and b) the government will be hesitant to materially ramp up spending ~18 months ahead of an election given cost of living concerns.”
  • You can see the latest state of play for fiscal forecasts in the table below, including the government’s Fall Economic Statement plus the Parliamentary Budget Office’s more timely estimates:

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