Finance minister keys in on housing, economy in pre-budget talks
OTTAWA— Finance Minister Joe Oliver got the bad news on the economy as he met with private sector economists to discuss Canada’s outlook in advance of the April 21 budget. The closed-door meeting is standard for federal finance ministers preparing a budget but the backdrop this time — an unexpected dive in world prices — was not. Here’s what was discussed:
The economy Summing up the views of the 12 private sector economists, Oliver said the economy now appears likely this year to grow by 2 per cent, a steep drop from the 2.6 per cent cited for 2015 in his Nov. 12 fiscal and economic update. Economic conditions worsened considerably in the first months of this year as the fallout from low oil prices, now in the $50-a-barrel range, has reverberated through the economy.
“The global economy remains fragile and global growth has been weak,” Oliver said. “The world’s troubles have reached our shores. Canada is feeling the effects of lower oil prices, both on the economy and the revenue streams governments rely on. Still, we’re building on a foundation of fiscal stability and relative economic success.”
The economy will pick up in 2016, Oliver said.
The housing market Oliver said the government has no intention at the moment of moving to cool off the red-hot housing market. “We are closely monitoring the residential real estate market,” he said. “We’ll take action if necessary.”
He was asked about the move Thursday of a Toronto credit union that offered what may be the lowest mortgage rate ever — 1.49 per cent. “We understand and are watching the fact that consumer debt is high,” Oliver remarked. But he pointed out that the credit picture has improved and “default rates are very low.”
Sales of GM Canada shares TD Bank chief economist Craig Alexander, who talked with the media afterwards, said the Conservative government may have evaded running another budget deficit in 2015 by selling its 73.4 million shares earlier this week in GM Canada.
In November, Finance Canada predicted a $1.6-billion budget surplus for 2015, but as the continued slide in oil prices undermined federal tax revenue expectations, economists have been saying Ottawa is on the verge of running another budget shortfall this year.
It is expected the federal government will be able to inject several billion dollars into its books in 2015 from the GM assets — likely enough to avoid a deficit.