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Free AccessMNI:Canada FY19-20 Budget Gap C$19.8B W/Pre-Election Elements
By Courtney Tower
OTTAWA (MNI) - Higher than expected revenues notably reduced the federal
government's deficit for the fiscal year just ending, but its projections show
that the deficit rises again for the coming fiscal year.
Finance Minister Bill Morneau brought down a 2019-2020 budget in Parliament
Tuesday that projects real GDP growth of 1.9% for calendar year 2018, 1.8% for
2019 and 1.6% and 1.7% for the two subsequent years.
The GDP projections are much in line with recent Bank of Canada estimates,
as are the CPI inflation estimates of 1.9% for 2019 and 2.0% for 2020.
The projected deficit for FY2018-2019 is now C$14.9 billion, down from the
C$18.1 billion gap expected last fall. However, the deficit goes up to C$19.8
billion for the fiscal year starting April 1, before starting a downward trend
from a C$19.7 billion gap for the following year, to C$9.8 billion by 2024.
Meanwhile, the federal debt-to-GDP ratio also remains on a downward trend,
albeit with very gradual improvements, from 30.8% in the fiscal year just ending
to 30.7% in 2019-2020, reaching 28.6% in FY2023-24.
The budget bases its predictions in part on assumption of WTI crude oil
prices of US$59/bbl this year and prices ranging from US$60/bbl in 2020 to
US$65/bbl by 2023.
Morneau's budget provided no further measures, beyond those contained in a
mini-budget last November 21, to make Canada more tax-competitive following the
major tax cuts provided in the United States in 2018. The government then
brought in sharply increased accelerated depreciation allowances, but no
reductions in federal corporate tax rates.
A signature measure of the new budget is directed at millennial Canadians
afflicted by soaring home prices. For first-time home buyers, Morneau proposed a
shared equity mortgage program with the government-owned Canada Mortgage and
Housing Corporation. CMHC would assume part of the down payment with the buyers,
to be repaid later.
The budget says that the government will watch the impact of various
regulations on mortgages that have been introduced, including stress tests for
low-down-payment mortgage applicants. It would adjust policies "if economic
conditions warrant, to support access to housing while safeguarding financial
stability."
A new program would give workers money to help for training for new
workforce skills. Job protection also would be offered for workers who would
leave jobs temporarily to learn new skills.
Another would take first steps toward a promised national pharmacare
program, creating a new Canadian Drug Agency to bargain on a national basis with
drug companies and to develop a national formulary for prescription drugs.
Students will have lowered interest rates on loans, municipalities will
have infrastructure funds topped up, new incentives will be introduced for
buying electric or hydrogen fuel cars.
--MNI Ottawa Bureau; +1 613 869-0916; email: yali.ndiaye@marketnews.com
[TOPICS: M$C$$$]
To read the full story
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.