Morneau eyes budget cushion ahead of Trump presidency

Uncertainty looms over U.S. policies

Finance Minister Bill Morneau is considering reintroducing a risk cushion as he prepares Canada’s next federal budget amid economic uncertainty driven in part by the Trump administration, according to people familiar with his plans.

Canada’s budget has typically included wiggle room, either by using lowball growth forecasts or by actually budgeting a line-item cushion.

Prime Minister Justin Trudeau’s government did the former in its first budget, before eliminating the practice in its November economic update.

In a move that would inflate deficit forecasts, the government is now considering reinstating some form of cushion because of several risk factors including U.S. president-elect Donald Trump, said three people who spoke on condition of anonymity.

Morneau himself was asked last week what contingencies, if any, he would put in place amid uncertainty over Canada-U.S. trade.

“We are looking forward to working with the new administration,” Morneau said, later adding the government would “be careful to ensure we have the capacity to deal with the environment we find ourselves in.”

Daniel Lauzon, Morneau’s communications director, referred to those comments and others made during the November economic update when asked about the potential of a risk adjustment.

Trudeau’s team is facing sluggish growth as the country continues to limp through the oil price shock. Current deficit projections of about $115 billion over the next five years are more than four times what Trudeau campaigned on in 2015. The government doesn’t presently forecast a return to balance.