Fiscal space tightens as economy falters, says deputy finance minister

HAMILTON — Canada’s associate finance minister says it will be a “turbulent” year for the economy, but Randy Boissonault insists the government still has room to spend on big priorities, including a new health care deal with the provinces.

HAMILTON — Canada’s associate finance minister says it will be a “turbulent” year for the economy, but Randy Boissonault insists the government still has room to spend on big priorities, including a new health care deal with the provinces.

Boissonnault spoke before the cabinet meets for the second of a three-day cabinet retreat in Hamilton, Ontario. Finance Minister Chrystia Freeland will give an economic update to the cabinet later on Tuesday.

“There is a lot of uncertainty,” Boissonnault said. “So we’ll be looking at this every step of the way as we prepare for the (2023) budget. We still have fiscal space to be able to do the things that we need to do, but the fiscal space has shrunk.”

He said the war in Ukraine and inflation are among the problems causing both uncertainty and economic damage.

On Monday, a joint report from the Business Council of Canada and Bennett Jones warned that the fiscal outlook set out in the latest federal budget and the fall economic statement was likely too rosy.

The report, authored by former Bank of Canada Governor David Dodge and former Liberal financial policy adviser Robert Asselin, said the government’s forecast was based on a set of “plausible but optimistic” economic and interest rate assumptions. which are unlikely to come true.

They warn there is a “high probability of a more severe recession” this year and that liberal promises on everything from health care funding and increased national defense spending to infrastructure improvements and climate change will cost dearly. more than projected.

Boissonnault said that report is one of many the government will consider in making its economic forecast ahead of the next budget. He said he believes the fiscal reality will fall somewhere between the best and worst case scenarios set out in the fall economic statement.

Prime Minister Justin Trudeau has said that affordability and making Canada competitive were his priorities ahead of this cabinet meeting.

Ongoing talks with provinces for a new health financing deal are also at the forefront and are one of the issues that could change the government’s spending plans. Provinces have asked for billions over the next decade to bring their health systems back from the brink of collapse.

Ottawa insists on responsibility for any new health funding and Trudeau has made no public commitment to meet the prime ministers’ demands.

Trudeau began his day Tuesday by meeting with Hamilton Mayor Andrea Horwath, a former leader of the Ontario NDP. The couple said the house was among their main topics of conversation.

House prices, and in particular the lack of affordable housing, have become a key problem for governments at all levels.

The cabinet meeting in Hamilton comes as it prepares for the return of Parliament next week. The industrial city, known predominantly as a steel town, is also one of the most politically competitive, particularly between the Liberals and the NDP. The Liberals won three of the four seats in Hamilton proper in 2021, beating the NDP to a seat that party had held since 2006.

The cabinet also received a stark reminder of the strong opposition they face from a group known as the “freedom convoy.” A small protest greeted Trudeau on Monday afternoon when he arrived.

A larger group, some three dozen or so, returned at night, where they waved flags, chanted and set off fireworks, including some that appeared to be aimed at the building.

Most disbanded by 11 p.m., but at least one protester spent most of the night honking from time to time, recalling the air horns of the big trucks that blocked off much of downtown Ottawa for three weeks ago. almost a year.

Next weekend will mark the one-year anniversary of the convoy’s arrival in Ottawa. The weeks-long lockdown and accompanying blockades at several border crossings prompted Trudeau to invoke the Emergencies Act for the first time since it replaced the War Measures Act in 1988.

The final report of the public inquiry into that decision is due in February.

This report by The Canadian Press was first published on January 24, 2023.

Mia Rabson, The Canadian Press





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