Economic update: Liberals under pressure by competing demands

OTTAWA – Trudeau’s Liberals are set to release an update on the health of the federal finances and its outlook for the economy while facing competing demands for benefits, taxes and economic growth.

This is a sizeable challenge for a document which, according to the Ministry of Finance, will not include a multitude of new expenditure items.

The government laid out its top priorities in the spring budget, such as a national child care system, said David Macdonald, senior economist at the Canadian Center for Policy Alternatives.

From a political standpoint, the government does not have much time before the holiday season to push for major new measures, Macdonald said. The government will likely wait for next year’s budget for any major spending proposals, he said.

“I don’t think there will be a lot of political news despite the fact that we just had an election,” Macdonald said.

“There will probably be very little in there, except the deficit numbers are probably smaller.”

The government predicted the deficit for the previous fiscal year to be $ 354.2 billion and almost $ 155 billion this year. But the federal pounds could have as much as $ 10 billion of additional fiscal space thanks to rising oil prices, which also helped push inflation rates up.

Inflation rates that have peaked in 18 years, along with strong job growth and the national economy, could cause the government to relax its platform spending plans, said Stephen Brown , Senior Economist for Canada at Capital Economics.

In a note, Brown wrote that the extra spending seems more likely to drive inflation up as changes take effect.

“It will be more interesting to see if the government follows through on its myriad of policy proposals for the housing market, which included a ban on purchases by foreign investors,” he wrote.

Finance Minister Chrystia Freeland suggested this week that the document would provide an overview of this year’s deficit trajectory and an account of new aid proposals that the government has estimated at $ 7.4 billion.

Some of these calculations have to do with the effect the Omicron variant may have on the number of cases, and any subsequent need to tighten public health measures or impose lockdowns to slow the spread of the virus.

Bea Bruske, president of the Canadian Labor Congress, urged Freeland to use the document to spend more on benefits, saying in a statement there are still thousands of workers who face financial uncertainty due to COVID -19.

She also suggested that the government could use the document to outline its proposed changes to the EI system, the long-known shortcomings of which have been exposed by the pandemic.

“The financial update must make it clear that the federal government is ready to make investments to make life more affordable and to ensure that essential services, like Employment Insurance, are there for people when they need them. Said Bruske.

Canada’s chartered professional accountants said on Friday the government could use the update to detail previously announced tax proposals that are expected to take effect next year, including one on the purchase of luxury cars, airplanes and of yachts, and another on vacant houses owned by foreigners. .

“Some of the changes are supposed to take effect in less than a month,” said Bruce Ball, vice president, tax, CPA Canada.

“We’re looking for clarification on how it’s going to play out and also a reasonable time frame to allow consultation on things that are still very conceptual and… time for companies to adapt.”

This report by The Canadian Press was first published on December 12, 2021.

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