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Thursday, February 22, 2024

The federal budget must prioritise post-COVID economic growth

The federal budget must prioritise economic growth following the COVID.

Key Takeaways:

  • The broad strokes of this year’s federal budget were laid out by Canada’s finance minister, who stated that she needs to boost the country’s economic potential while keeping inflation rates at levels not seen in 30 years.
  • According to the Finance Department, the deficit is expected to reach $144.5 billion this year, up from $327.7 billion the previous year.
  • Despite the government’s budgeted subsidy of nearly $2.8 billion, the budget office estimates that total subsidies will be only $814 million.

Canada’s finance minister laid out the broad strokes of this year’s federal budget, stating that she needs to boost the nation’s economic potential while keeping inflation rates at levels not observed in 30 years.

Chrystia Freeland also stated that the budget would address housing affordability concerns, implying that the document might include a slew of measures outlined in the prime minister’s marching orders to crack down on real estate investors.

Freeland focused her remarks on the need for the budget to make the nation more competitive and innovative during a mid-afternoon news conference where she launched pre-budget talks that will run until late February.

Also read: In a World Cup qualifier in Hamilton, Canada defeats the United States

She also stated that the budget should assist in funding the transition to a green economy, which could be costly, and move beyond the current focus on reducing greenhouse gas emissions.

“When I think about what I want in the budget, I think about measures that increase Canada’s ability to grow strongly post-COVID,” Freeland said.

“An expanding economy can truly provide prosperity for all of its citizens.”

After a pricey two years in which the Treasury has pumped out unprecedented aid to battle the economic fallout from COVID-19, Freeland stated a growing economy would help keep federal finances on solid ground.

The deficit is expected to reach $144.5 billion this year, up from $327.7 billion the last year, as per the Finance Department. Without any new spending promises in the budget, the deficit for the next fiscal year, which begins in April, is expected to be $58.4 billion.

Earlier Monday, parliamentary budget officer Yves Giroux told the House of Commons finance committee that he expects deficits to be the norm in the coming years.

That isn’t necessarily a problem; he said, as long as the deficits are “relatively small” as well as the economy grows, bringing in more federal revenues to cover the costs.

The federal budget must prioritise economic growth following the COVID.
The federal budget must prioritise economic growth following the COVID. Image from HT

According to Giroux, larger federal deficits pose a risk because of where the government spends its money. “It can usher to inflationary pressures,” he said if the spending does not create additional production capacity in the economy but instead stimulates demand.

Last week, the Bank of Canada stated that the economy appears to have reached its productive capacity, implying that too much government stimulus could boost consumer spending and exacerbate inflationary pressures.

As she crafted her spending plan, Freeland stated the govt would keep higher inflation rates in mind.

Separately, Giroux’s office forecasted that the government’s hiring program would fall far short of the amount budgeted to offer subsidies to eligible businesses that increase their payroll.

Although the government has budgeted nearly $2.8 billion in subsidies, the budget office estimates that total subsidies will only be $814 million.

The disparity stems partly from the government’s and PBO’s expectations for the economy and businesses in the coming months.

In its report, the budget office stated some uncertainty about the rate of economic growth, particularly the future effects of COVID-19.

Source: Global News

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