The economic recovery that Canada has experienced for four consecutive months has changed the federal government’s deficit projections significantly, according to Cyberpresse.
The deficit for fiscal 2009-10, which ended on March 31, is expected to be $5 billion less than forecast in the March 4 budget tabled by the Conservative government. The 2010-11 predictions, meanwhile, could similarly be revised downwards to $40 billion, a change of $10 billion from the budget.
Jim Flaherty announced that the 2009-10 fiscal deficit stood at $54 billion last month, but four months of recovery, followed by an announcement of just a $300 million deficit for the month of January, means that the deficit could fall somewhere in the neighbourhood of $49 billion.
This is contrary to an article that appeared in the CBC on March 26, that indicated the September projection of the $56-billion deficit has been “little changed” by the March budget. With two months left to be accounted for in fiscal 2009-10, the deficit stands at $39.6-billion. If February and March can post deficits below $1 billion, the final figure could come in $12-billion below the budget projections.
Year-end adjustments will certainly mean that the deficits for the last two months of the fiscal year will rise, but they should come in at a lower number than $7 billion for each month. The budget called for a conservative growth rate of 2.6% in 2010, and 3.2% in 2011, which was called too optimistic by the Parliamentary Budget Officer, but so far the recovery has exceeded expectations.
Chief Economist at National Bank Financial, Stéfane Marion, told Cyberpresse that the economy is so strong right now that it will revise all previous projections.
“What is clear is that the deficit will be lower than we had anticipated this year and next year. The unexpected strength of the Canadian economy in the fourth quarter will have a positive impact on finances. And the first quarter of the year is also good. Public finances will improve more quickly than you think.” [Translation from French]
There are some obvious caveats, however, as the big banks have all begun to increase interest rates in anticipation of the Bank of Canada’s end to the record lows. Further dampening the market is the expected hit from the HST in July which is coming into effect in Ontario and British Columbia.
Its good news, but of course its very preliminary and speculative, but I think its pretty indicative of the difficulty in attempting to forecast something as large and complex as a national economy even a few quarters ahead let alone years or even an entire business cycle into the future.
There are some obvious caveats, however, as the big banks have all begun to increase interest rates in anticipation of the Bank of Canada’s end to the record lows.
But the reason the Bank of Canada is about to raise interest rates is to cool the economy to fight inflation. The HST changes are designed to be revenue neutral for governments, I think you’re right, though, to be skeptical that businesses in BC will pass on tax efficiencies completely or quickly.
Yes, I think “eventually” might be a more apt word.
The MSM better quickly contact Kevin Page and have him say it isn’t so! We all know how the opposition love him because he seems to deliberately take the most ominous reports and use them as fact.
So, let’s hear from Mr. Page. How come his predictions are so wrong? Does he need even MORE money? Is he waiting for another election so he can spout his garbage viewpoint? Come on down Mr. Page, we have some questions for you.
I am a little curious to hear from the Budget Officer.
Page has been right about everything up to now. If he’s wrong once, then he’s just made a mistake. Still, wouldn’t surprise me at all to see him totally vindicated. Cue more Harperbot whining.
Page has been wrong just as much as anyone else, but he is in good company being proved wrong, with David Dodge and the IMF and leagues of economists around the world.
Page needs to show a little humility.
The recession caught everyone by surprise, in it’s depth and speed to find bottom.
so no surprise now if the rate of growth exceeds expectations…
And Iffy offered NOTHING to the stimulus budget nor the recovery budget.
PMSH gets to wear it all, and he’s lookin’ good.
“The recession caught everyone by surprise, in it’s depth and speed to find bottom.”
Nope. Though that is some interesting historical revision.
“And Iffy offered NOTHING to the stimulus budget nor the recovery budget.
PMSH gets to wear it all, and he’s lookin’ good.”
Hmmm, speaking of revisionism…
Remember when Harper put forward an economic update that contained absolutely no stimulus? Remember when he nearly lost his government over it? Remember when he prorogued and returned with a stimulus budget that the liberals supported?
Good times, good times…
Oh I remember when he caved. Now we get to carry all that debt for years, with no benefit. Thanks government! And please, when has Page ever been wrong up to now? Honest question.
All he’s done is predict that the government’s plan to reduce the deficit won’t work. So far there is no way to know if he’s right or not.
All we know is that for the final quarter of 09-10, and the first quarter of 10-11 it appears the government actually under-estimated growth projections, instead of over-estimating them.
My memory is a little foggy, but I seem to remember back in the nineties and early new millennium the Liberals used to consistently under-estimate revenue growth, and then “surprise” us with huge surpluses.
Not to mention, PM Harper’s first three budgets all had larger surpluses than first projected. If government projections had a history of coming up short, I would be more inclined to side with Kevin Page. But, that’s not the case
One of the most important numbers will be the actual defecit for 2010/11. Flaherty projected that number to be $48 billion. We will have a good idea of the actual defecit, when Flaherty tables his next budget.
So, assuming that actual defecit comes in a lot lower than $48 billion, then that gives Harper a powerful talking point, in his narrative that we are better stewards of the economy than the Libs. Of course, the Libs will nitpick every other aspect of that defecit–the projections were purposely high, unemployment is still too high, yadda, yadda.
But voters will be able to understand that one simple defecit number, which we can hype up out of all proportion, just to irritate the Libs, Kevin Page, et al.
Yeah, but how can we trust Flaherty to give us the “actual” deficit number?
These are the same guys who denied we were already in a deficit during the last election, when we were, and who denied we would ever be in a deficit.
It’s not so much that Page is wrong; it’s that he makes sweeping projections that he claims to be absolute fact when the truth is that nobody knows what the future will bring. Three months ago all of the economists were seeing signs of a steady but modest rate of economic recovery; now the economy is booming and outstripping everyones’ projections. So his guarantee that the deficit is structural becomes more suspect every day.
Page’s problem is that he presents his forecasts as Holy Writ with a side serving of Gotcha, when in fact they are exactly the same as all economic forecasts–little more than an educated guess based on current and anticipated trends.
when in fact they are exactly the same as all economic forecasts–little more than an educated guess based on current and anticipated trends.
And if the PBO’s forecasts are just as good or as bad as the private sector forecasts, what exactly it the added value that the PBO brings to Parliament and to Canadians? Fold the PBO into the Dept. of Finance, put up a website with quarterly results, projections no more than 2 quarters in advance, and the government has to be POLITICALLY accountable at election time.
@Gayle says “Remember when Harper put forward an economic update that contained absolutely no stimulus?”
This is one of the biggest lies told in Canadian politics since the sponsorship scandal. Many people believe it, but it is demonstrably FALSE.
Check Hansard for yourself. In the 2008 economic update, Flaherty said there would be a slim budget surplus if they did nothing, but that doing nothing wasn’t an option. In the update, he booked stimulus spending that would produce a $5bn deficit in 2008/09. He also promised an early budget in January that would include stimulus spending of 2% of GDP in 2009/10, as agreed by the G20 in Washington weeks earlier.
The Liberal-NDP-Bloc coalition needed an excuse to seize power after Harper withdrew the cuts to political subsidies, so they lied about this from day one. And they are still lying about it.
@Gayle also said “These are the same guys who denied we were already in a deficit during the last election, when we were”
That is also demonstrably FALSE. The first month we ran a deficit was January 2009. The government was clearly still running surpluses during the election, and through the coalition crisis.
I will grant you the first point, but not the second.
Thanks Zoop, nice to see Gayle countered with facts that I knew existed but she either forgot, or perhaps just hoped that we forgot. Easy to be a revisionist, eh Gayle?
Also Gayle, you forget the shitstorm the CPC caused by threatening to remove the taxpayer funding of the political parties. I think it was more this removal of funding than the lack of economic stimulus that prompted the opposition parties to band together. Don’t forget that this was also the same time that Obama promised to spend a Trillion Dollars (insert Dr. Evil laugh here) to fend off the recession.
http://www.examiner.com/x-12465-Washington-County-Independent-Examiner~y2009m12d8-Obama-proposes-spending-our-way-out-of-recession
As Obama started to talk about spending his way out the CPC started to discuss modest spending, as pointed out by Zoop. It was only after the attempted palace coop did the CPC increase to near ludicrous speed in spending, just to make the progressives happy! You can probably find lots of examples of unhappy conservatives who thought that it was too much, but other examples of progressives who thought it was too little.
To get back on topic, it seems that Federal Budgets always underestimate the income, as pointed out here Martin was famous for doing it.
Yeah, yeah, yeah.
Actually, I vaguely remember now the issue was the amount of stimulus. That remained the issuye even after Harper revoked his plan to cut party financing. Or maybe you forgot that the parties moved forward with the coalition plans even after Harper announced he would revoke that plan.
[...] the deficit increased by only $902 million in February, up slightly from the $300 million deficit for the month of January. With one month left to report, the deficit sits $13.3 billion below projections by the [...]