Deficit reduction ahead of schedule

Shortfall is already $10 billion lower than projected for 2011-12 fiscal year

OTTAWA – The federal government posted its second consecutive monthly budget surplus in February, pointing to a much smaller deficit for the year than originally planned.

The jump in revenue and reduced spending also could help the government balance its books at least a year earlier than the current 2015-16 target. “There’s a pattern de- veloping here,” said Douglas Porter, deputy chief economist at BMO Capital Markets.

“It’s within the realm of possibility that (the government) could balance the budget within a couple of years,” he said.

The February surplus totalled $1.5 billion, compared to a nearly $600-million deficit in February 2011, the Finance Department said Friday. In January, the government swung to a $1.7-bil- lion surplus from a deficit of $353 million in December.

Revenue in February rose $1.1 billion from a year earlier to $22.6 billion, while program expenses fell by $700 million to $18.8 billion.

Meanwhile, the shortfall for the first 11 months of fiscal 2011-12 fell to $14.5 billion from a deficit of $28.3 billion for the same period a year earlier. Revenue was up $9.8 billion to $220.1 billion between April and February. Program spending was down $4 billion to $206.2 billion for the same 11 months. With just one month left in the 2011-12 fiscal year, the government’s shortfall is already more than $10 billion lower than projected.

In its March 29 budget, the government cut the deficit estimate for the current year to $24.9 billion from $31 billion and set the shortfall for 2012-13 at $21.1 billion. The deficit is expected to shrink to $10.2 billion in 2013-14 and fall to $1.3 billion the following year. The surplus is forecast to be $3.4 billion in 2015-16, and reach $7.8 billion a year later.

“Based on our economic projections, we had been assuming that they would be able to actually post a small surplus for 2014-15, which, conveniently, the final numbers on that would be coming out right around when the next election is slated for,” Porter said.

The Conservative government is relying on pending cuts and moderate economic growth to get it back into sur- plus. As for the economy, Finance Minister Jim Flaherty said in the March budget that GDP is forecast to rise 2.1 per cent this year and 2.4 per cent in 2013. But 2012 got off to a relatively slow start, with Statistics Canada data showing January growth of just 0.1 per cent, following a 0.5-percent increase in December.

The Conservative government plans to cut $5.2 billion in spending over the next three years and eliminate 19,200 federal jobs as part of its plan to balance the budget.

Parliamentary Budget Officer Kevin Page said Wednesday there also will be marginal savings from changing the age of eligibility for Old Age Security.