The federal government’s autumn economic statement, released just hours after Finance Minister Chrystia Freeland resigned from cabinet and questioned the government’s recent economic response, calls for more than $20 billion in new spending. The budget deficit is said to have widened to $61.9 billion.
The government’s long-awaited fall economic statement delivered on Monday also promises a $1.3 billion border security package over six years, Ottawa’s plan to fend off U.S. President-elect Donald Trump’s threat of high tariffs. However, the 270-page document does not include an explanation of exactly how that money will be used.
The day was thrown into turmoil after Freeland, who was supposed to make the statement, resigned from Prime Minister Justin Trudeau’s cabinet.
Freeland, who has served as finance minister since 2020, said in a letter to Trudeau posted on social media that he had no choice but to resign after the prime minister approached him on Friday about moving to another cabinet position. said.
She also bid farewell to her boss’s handling of the country’s economy, condemning the government’s “costly political maneuvering” and imploring him to work with prime ministers to confront Trump’s tariff threat.
As expected, the document includes the government’s promised GST holiday, which comes into effect on Saturday and is expected to cost $1.6 billion.
The document does not include the government’s promise to send $250 checks to working Canadians.
Sahil Khan, executive vice-president of the Institute for Fiscal Studies and Democracy at the University of Ottawa, said there isn’t much of a gimmick in the document other than the tax holiday.
“In fact, this is probably the first time we’ve seen a shift from a consumption-based wealth redistribution budget to an investment-based budget,” he said.
“We’re still borrowing money for this. We’re still getting more debt for this, but there’s a tipping point.”
In his spring 2024 budget speech, Mr Freeland set out a signpost of the government’s continued commitment to fiscal responsibility. The first is a promise to keep the budget deficit below $40 billion in 2023-2024.
The federal government far exceeds that standard. Monday’s latest update shows a deficit of nearly $62 billion.
The federal government says this is due to one-time costs, including $16.4 billion related to Indigenous claims being challenged in court and $4.7 billion related to the COVID-19 pandemic. . The document does not say which insurance benefits the government will pay.
“It’s definitely a fiscal surprise on the negative side. It’s not something Canada can’t handle, but it’s definitely a surprise,” Khan said.
Another government commitment was to keep the debt-to-GDP ratio falling. The government is barely staying within its guardrails, according to the autumn economic report.
The federal debt-to-GDP ratio was 42.1% in 2023-24, but the government now expects it to fall to 41.9% in 2024-25.
“But it’s still probably higher than some people would like,” Khan said.
Today’s fiscal update comes as Canada navigates uncertainty in its most important trade relationship. President Trump has threatened to impose 25% tariffs on imports from Canada and Mexico, citing concerns about border security, immigration and illegal drugs. Tariffs at this level could cripple Canada’s economy.
ambiguous border plan
The fall economic statement suggests the government is prepared to increase spending on the Canada Border Services Agency, RCMP, Public Safety Canada and the Communications Security Agency, but details on how the money will be used remain unclear. It’s not clear.
Most of the new investments mentioned in the statement are incentives aimed at encouraging investment in Canada and addressing what is said to be Canada’s productivity problem.
The government announced it would spend $17.4 billion to extend the Accelerated Investment Incentive, a temporary tax change that allows companies to immediately write off the value of their investments.
Khan said the new spending is primarily business-oriented and growth-oriented.
“For this Liberal government, what are we not focused on?” he said.
