OTTAWA – Canada’s finance minister has outlined this year’s federal budget, saying she wants to boost the country’s economic potential while taking into account inflation rates not seen in 30 years.
Chrystia Freeland also said the budget would address housing affordability issues, saying the document could include a range of measures to crack down on property investors that were outlined in her Prime Minister’s Marching Orders.
During a late afternoon press conference where she launched pre-budget consultations that will continue through the end of February, Freeland focused her comments on the need for the budget to make the country more competitive and innovative. .
She also noted the need for the budget to help finance the transition to a green economy, the costs of which could be high, and to go beyond the recent focus on reducing greenhouse gas emissions. Greenhouse.
“When I look at what I want to have in the budget, I want to have measures that increase Canada‘s ability to grow really, really strong post-COVID,” Freeland said.
“A growing economy is an economy that can actually create prosperity for all of its people.”
Freeland said a growing economy would help keep federal finances on solid footing after two costly years when the Treasury provided unprecedented assistance to combat the economic fallout from COVID-19.
The Department of Finance forecasts the deficit will reach $144.5 billion this year, one year after a deficit of $327.7 billion. The deficit for the next fiscal year, which begins in April, is expected to reach $58.4 billion, not counting new spending promises in the budget.
Speaking to the House of Commons Finance Committee earlier on Monday, Parliamentary Budget Officer Yves Giroux said he expected deficits to be the norm for years to come.
That’s not necessarily a problem, he said, as long as deficits are “relatively low” and the economy is growing, generating more federal revenue to pay for rising costs.
The risk with larger federal deficits depends on where the government spends its money, Giroux said. If spending doesn’t create additional productive capacity in the economy and instead stimulates demand, “it can lead to inflationary pressures,” he said.
The Bank of Canada said last week that the economy appears to have reached its productive capacity, leading to a scenario where too much government stimulus could boost consumer spending and worsen inflationary pressures.
Freeland said the government will be mindful of higher inflation rates when crafting its spending plan.
Separately, on Monday, Giroux’s office projected that the government’s hiring program would fall well short of what is planned to provide subsidies to eligible companies that increase their payrolls.
While the government has budgeted nearly $2.8 billion in grants, the budget office expects total grants to reach just $814 million.
Part of the difference is how the government and the Parliamentary Budget Officer expect the economy and businesses to do in the months ahead.
The budget office noted in its report that there is some uncertainty about the pace of economic growth, including the potential impacts of COVID-19 in the future.
This report from The Canadian Press was first published on January 31, 2022.