Liberals to chart fiscal course

AT MID-MANDATE AND WITH EXTRA CASH, FEDS PLAN FOR ’19

The Trudeau government, right at the midpoint of its mandate, will map out its financial path this week and announce new measures as it enters the two-year stretch toward the next election.

The fall update will also reveal Tuesday what the Liberals plan to do with an unexpected windfall that experts predict could be as high as $10 billion in each of the next couple of years.

The midterm bump is the welcomed product of the strong economic surge in early 2017 that caught forecasters off guard.

Will Finance Minister Bill Morneau seek to use the extra financial breathing room to start grinding down the multibillion-dollar deficits across his outlook?

Or will he pour a large sum of the additional cash into new spending and lingering commitments? “This is probably the year in which we will get the best possible fix on how committed they are to returning to a path of lower deficits,” said Scotiabank chief economist Jean-Francois Perrault, a former assistant deputy minister under Morneau.

“They’ve got money to spend if they want to spend it. But if they want to send a message of a reasonable degree of fiscal conservatism, it’s also their chance to send that message.”

Without new federal spending, Scotiabank is predicting shortfalls of $17 billion in 2017-18 and $16 billion in 201819.

By comparison, Morneau’s budget last March forecasted deficits of $25.5-billion for 2017-18 and $24.4 billion for 2018-19.

But Ottawa could choose to spend some of these extra funds. The next question is: where would it go?

A senior government official, speaking on condition of anonymity ahead of the announcement, said Tuesday’s update will include some new measures — but insisted the document won’t be as thick as last year’s edition.

The official described it as more of a fiscal and economic update, rather than a mini-budget containing big announcements.

Last year’s update included major new plans like the government’s $35-billion infrastructure bank, which is designed to use public money as a way to lure private capital for new, large-scale projects such as transit systems. It also contained other significant changes to attract a greater number of talented immigrants to Canada and to create a hub mandated to lure more foreign investment.

This year, expect the Liberals to share more specifics on how they intend to deliver on big commitments, including those for Indigenous peoples and infrastructure investments, said Sahir Khan, the executive vice-president of a University of Ottawa think tank.