Craig Wright, Chief Economist, and Paul Ferley, Assistant Chief Economist at Royal Bank of Canada share their views on the 2017 Canadian Federal Budget.
Heading into Budget 2017, expectations were for a stay-the-course budget with little in the way of new spending or taxes. That’s what Finance Minister Bill Morneau delivered, though he provided more details around the government’s previously announced spending plans, and introduced some modest initiatives to spur innovation. Scope for more significant measures was limited by Ottawa’s increasingly stretched fiscal position.
Ottawa’s fiscal path is now one of deficits as far as the eye can see. Morneau had already abandoned earlier talk of balancing the budget around the end of the Liberals’ mandate in favour of reducing Canada’s debt-to-GDP ratio. The budget showed even further weakening in the government’s resolve, dropping any reference to reducing the federal debt burden. If Budget 2017’s growth assumptions are correct, the government will likely hold the debt-to-GDP ratio around 31%, though at the expense of an increase in debt of $140 billion over the next few years.
Most of us will be pleased that the budget didn’t include any major tax increases. But that good news could prove temporary, since any nasty surprise in Canada’s economic outlook could derail the government’s plans. Then it may have no choice but to raise taxes to fill a deepening fiscal hole.