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Expect a stimulus budget from Ottawa this Tuesday


March 18, 2019  


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With a federal election looming and Prime Minister Justin Trudeau’s government facing its worst political crisis in four years, Canada’s ruling Liberals are expected to table a goody-filled budget later this week in a bid to get back on course with voters.

Trudeau’s Liberals surged to power in 2015 on a pledge to jolt the economy by boosting spending, but their popularity has dropped sharply in recent weeks amid claims that Canada’s former Justice Minister was pressured to help construction firm SNC-Lavalin avoid a criminal trial, according to Reuters.

Adding to the pain, economic growth slowed sharply at the end of 2018 and, despite blockbuster job gains, Canadians are feeling increasingly pessimistic about the future as record household debt runs up against higher interest rates.

To counter the negative sentiment, Finance Minister Bill Morneau is expected to make use of unexpectedly strong revenues from the first nine months of the fiscal year to table a stimulus-filled federal budget this Tuesday, the last budget ahead of an October election.

High on the list of expectations is supports for millennial home buyers, money for skills re-training, pharmacare help for those lacking prescription drug plans through their workplace, and new spending for families with children.

If Morneau wants to look fiscally prudent, the key will be to divvy up only the unexpected revenue, and not disrupt plans to reduce the net-debt-to-GDP ratio – a measure of how burdensome debt is relative to the economy, Derek Holt, head of Capital Markets Economics at Scotiabank, told Reuters.

“If they want their cake and eat it too, you spend only the unanticipated revenue surprise, and you keep your powder dry on the rest,” he said.

(Reuters)


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