Liberals to chart renewed fiscal course

Surging economy has left Trudeau, Morneau with unexpected windfall

OTTAWA — The Trudeau government, 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 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 2018-19.

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 $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.