| OTTAWA, March 22
Canada’s Liberal government
unveiled a stay-the-course budget on Wednesday that targeted
export growth and some measure of tax reform but did little to
whittle away at deficits even as it backed off from an explicit
pledge to improve the debt outlook.
Finance Minister Bill Morneau’s second budget contained few
surprises, in line with expectations that Ottawa wants to wait
to see what impact U.S. President Donald Trump’s still-evolving
policies will have on Canadian competitiveness and trade before
committing to further stimulus or tax reform.
Morneau repeatedly referred to the benefits of free trade,
pushing back on U.S. protectionism just a week after a pledge to
promote free trade was removed from the concluding statement of
the G20 meeting in Germany at the insistence of the United
States, Canada’s largest trading partner.
The budget blueprint, which is bound to be implemented given
the Liberal’s parliamentary majority, reinstated a fiscal
cushion, effectively a rainy day reserve set at C$3 billion a
year to guard against any unexpected event that could hurt the
government books, a move economists praise as prudent.
Bringing back the cushion widened the projected deficit in
2017-2018 to C$28.5 billion from C$27.8 billion forecast in
November, nearly three times the C$10 billion annual deficit
targeted by the Liberals during their 2015 election campaign.
But, combined with modest economic assumptions that look
easy to beat, the cushion should allow the government to trumpet
a better-than-expected performance as it nears the 2019 federal
Still, the move to drop an explicit goal of improving the
debt-to-GDP ratio over the course of the government’s four-year
mandate disappointed economists concerned that Canada is not
prepared to rein in deficits after trying to stimulate tepid
growth with infrastructure spending and tax cuts for families.
“In terms of ‘stay the course’ and ‘do no harm,’ I think the
budget achieved those goals, but I would have preferred they’d
left an explicit target some sort in terms of debt to GDP
declining or ideally a balanced budget,” said Craig Wright,
chief economist at RBC.
The Liberals had previously promoted the ratio, which at
about 31.5 percent of GDP is low compared to many G7 rivals, as
a better measure of the nation’s debt burden than the deficit,
which had been eliminated under the previous Conservative
Morneau, who touted the budget as “ambitious but
responsible,” laid out a plan to grow Canada’s goods and
services exports by 30 percent by 2025, a lofty goal given the
slow pace of export growth since the 2009 recession.
In continuing the Liberal’s pledge to increase taxes on the
wealthiest Canadians to help the middle class, the budget
promised to close a loophole that allowed high-income earners to
use private corporations to reduce income taxes. It also pledged
to tax ride-sharing programs, such as Uber, at the same rate as
While the budget did not contain any measures aimed at
cooling Canada’s hot housing market, Morneau promised additional
money to gather housing data, seen as a possible first step to
reining in foreign investment or speculation that observers say
has created a bubble in Toronto, Canada’s largest city.
(Additional reporting by Leah Schnurr and David Ljunggren; and;
Editing by Dan Burns)