Minister of Finance Bill Morneau speaks to reporters after leaving a cabinet meeting on Parliament Hill in Ottawa on Feb. 6. (Justin Tang/The Canadian Press)

Trudeau government to table budget Feb. 27 as Canada faces uncertainty

Finance minister’s fall fiscal statement predicted deficit of $18.4 billion in 2017-18

Finance Minister Bill Morneau will introduce the federal government’s next budget on Feb. 27 as the country faces persistent uncertainty around trade and competitiveness.

With the future clouded by such unknowns, private-sector experts will press Morneau to keep his fiscal powder dry when they gather later this week for their annual pre-budget meeting.

Morneau, who announced the budget date Tuesday in the House of Commons, sits down Friday in Toronto with leading economists at a roundtable that typically includes about a dozen experts from commercial banks, think tanks and trade associations.

Finance ministers routinely call on outside economists for input and forecasts as part of the budget-writing process. Their projections are averaged to create a fiscal foundation for the budget.

Some economists say that late-2017 improvements in the economy will likely give Morneau more fiscal elbow room in the budget, compared to his October update. Others are less optimistic about the changes in recent months and expect the government to find itself in a similar budgetary position.

But regardless of the fiscal footing, there’s agreement that the government should proceed with caution. They want Ottawa to make sure it’s ready for the still-unknown impacts of the drawn-out renegotiation of the North American Free Trade Agreement and the U.S. move to slash corporate taxes.

“Those are definitely the big two — there’s no question about it — and the kind of chill that that could potentially put on the business investment climate in Canada,” said BMO chief economist Doug Porter, whose colleague will attend the Morneau meeting in his place

“That’s a tough twosome to deal with.”

Last month, the Bank of Canada highlighted the widening negative impacts of NAFTA’s uncertain future. The bank not only made a point of emphasizing the potential effects on trade, but also the potential damage on business investment caused by uncertainty itself.

The central bank estimated trade uncertainty would lower investment by two per cent by the end of 2019. It said new foreign direct investment into Canada had tumbled since mid-2016 — a possible consequence of the unknowns around trade.

The bank also warned that lower corporate taxes in the U.S. could encourage firms to redirect some of their business investments south of the border.

Business associations fear the U.S. tax changes could end up inflicting more damage on the Canadian economy than the possible termination of NAFTA.

Morneau’s office has responded to the concerns by arguing that Canada has advantages such as an educated workforce and still boasts a competitive tax rate among G7 countries, even after the U.S. reforms. Ottawa is carefully assessing the U.S. tax changes and will take time to fully understand their potential impacts, his office said in a recent statement.

Scotiabank chief economist Jean-Francois Perrault said he doesn’t think the corporate tax changes in the U.S. will have a major impact on Canada — but he admits they could.

Perrault, who will attend Friday’s meeting with Morneau, recommends the government hold off on any big spending plans just in case it needs to respond with tax measures of its own to keep Canada competitive.

“It would be very prudent for the government to wait until we see if, in fact, there is evidence that what’s happening down south in the U.S. is having a detrimental effect on Canadian business,” Perrault said.

Heading into the budget, he thinks the solid economy has given Morneau more fiscal space than he had in the fall.

In October, Morneau’s fall fiscal statement predicted a deficit of $18.4 billion in 2017-18 and a $15.6-billion shortfall in 2018-19.

Perrault, a former assistant deputy minister under Morneau, said he now expects Ottawa to be on track for deficits of $16.8 billion in 2017-18 and $14.8 billion in 2018-19.

On Tuesday, Morneau offered a preview of what the government narrative surrounding the budget will likely sound like.

“We’ve seen real improvements over the last couple of years for middle-class Canadians — more confidence and among the lowest unemployment rates in the last 40 years,” he said during question period.

“But there’s more work to do, Mr. Speaker. On Feb. 27, we’re going to announce the next budget to continue our plan.”

Andy Blatchford, The Canadian Press

Just Posted

Ucluelet mayor thanks team at last meeting

Dianne St. Jacques is not running for re-election this month.

‘Police are ready’ for legal pot, say Canadian chiefs

But Canadians won’t see major policing changes as pot becomes legal

VIDEO: Rescued eagle released in Ucluelet

“I’m very confident that he’s going to make it. He’s done very well.”

Ahousaht Fire Department always at the ready

“Under stressful situations we come out at our best.”

Tofino honours volunteer firefighters with award

To have the community support you, say ‘Thank you,’ and recognize you, just really means an awful lot

Legal pot price must be ‘competitive’ with black market: Blair

Bill Blair shared final words on journey to legalization ahead of official day Wednesday

Mayor of Kamloops says ‘history has been made’ with vote on B.C.’s lone pot shop

The store to be run by the province in B.C.’s Interior is opening Wednesday as pot sales become legal across Canada

New bus route to ‘replace’ Greyhound along Trans-Canada Highway

Rider Express Transportation says they will soon begin a bus service from Winnipeg to Vancouver

U.S. pot firm urges Trump to deny Canadian producers ‘competitive advantage’

The challenge for U.S. firms lies in the fact that while recreational cannabis is legal in nine states and medicinal pot in 22 others, it remains illegal under federal law

Government says imprisoned Canadian terror suspects must face consequences

Public Safety Minister Ralph Goodale showed little sympathy Tuesday for such individuals who now want to return to Canada

How rules for inmate segregation in Canada will change under Bill C-83

Federal government proposing changes to rules around inmates in federal correctional institutions

Canada Post union issues strike notice; rotating strikes could begin Monday

Union says rotating strikes will begin if agreements aren’t reached with bargaining units

Duncan play faces challenges even before first performance as thieves strike

Thefts hamper Deathtrap days before opening at Mercury Theatre

Carole James avoids questions on B.C.’s payroll tax (with video)

Green MLA Adam Olsen cites huge tax increase for local business

Most Read