The federal government will open its books to public scrutiny before the end of the year, Finance Minister Bill Morneau promised Tuesday after a report warned that deteriorating economic conditions could drive Canada into deeper deficits.
The report by the parliamentary budget officer suggested the new Trudeau government was on track to face larger-than-expected baseline shortfalls in the coming years.
The Liberals won last month’s federal election after vowing to roll out large spending plans for projects like infrastructure, which the party argued will kick-start economic growth and create jobs.
But the revised figures suggest it will be tougher—by billions of dollars—for the Liberals to fulfil their campaign promise to cap deficits at no more than $10 billion over the next two years and still balance the books before the next election.
The updated numbers came after the budget office downgraded its economic projections for Canada, blaming the gloomier forecast on weaker growth, low commodity prices and shrinking revenues.
For now, at least, the Liberals say they’re sticking with their plan.
Morneau said it was “way premature” for any decision on whether the government would tweak campaign commitments because of the lower projections.
“As you heard during the course of the campaign, we were and continue to be concerned with the state of the economy—and that really was the foundation for our platform,” said Morneau, who promised a fiscal and economic update by Christmas.
“We’re working towards having an update for Canadians in the near term so they can understand what it is that we’ve taking on as a new government.”
Morneau, who will travel to Turkey later this week for G20 meetings, said it’s still too early for him to provide a more specific timeline for the update. He also said it was too soon to say when the government would table its first budget in the new year.
To help fund their infrastructure pledges, the Liberals said they would run deficits of less than $10 billion in each of the next two years. Those platform figures were based on calculations made in July by the parliamentary budget office.
The July PBO numbers were produced by recalculating the previous government’s projections from the April budget using downgraded Bank of Canada growth forecasts.
The PBO numbers released Tuesday, however, suggest the government’s fiscal starting point will be billions of dollars lower in those two years — by $3.6 billion in 2016-17 and by $6.9 billion in 2017-18. After factoring in the Liberal spending pledges, it could mean deficits of more than $13 billion in 2016-17 and more than $16 billion in 2017-18.
The Liberals have also said they would run a $5.7-billion shortfall in 2018-19 before delivering a $1-billion surplus in 2019-20 — but those projections are based on a combination of April’s Finance Department forecasts and the party’s own predictions.
The budget office said its predictions Tuesday do not take into account the fiscal impact of any measures in the Liberal government’s election platform.
The report also updated the budget office’s own fiscal projections from April.
Back in April, the budget office said Ottawa would run a $1.1-billion surplus in 2015-16, break even in 2016-17 and post a $2.6-billion deficit in 2017-18. The spring forecast also projected shortfalls of $2.8 billion in 2018-19 and $2.5 billion in 2019-20.
The office is now forecasting a $1.2-billion surplus in 2015-16, but says it will be followed by four straight deficits that are on average $2.4 billion lower per year than its April projection.
It expects shortfalls of $3 billion in 2016-17, $4.7 billion in 2017-18, $5 billion in 2018-19 and $4.6 billion in 2019-20.
“It is worse than what we had expected, but it is not a disaster,” assistant parliamentary budget officer Mostafa Askari said Tuesday of Canada’s economic outlook.
“It’s a pause in the economic growth and as a result we have seen some deterioration in the fiscal picture for the government.”
Both the New Democrats and Conservatives pounced, demanding to know how the government plans to manage an ugly economic and fiscal situation.
Conservative MP Tony Clement urged the Liberals to explain how they will avoid running up bigger deficits than it they had promised.
Morneau also said he is looking into the possibility of holding a meeting of provincial and territorial finance ministers next month.