Earlier this afternoon, Canada’s Minister of Finance, Bill Morneau, presented the federal government’s 2018 Fall Economic Statement, updating the budget forecast of major revenues and expenses for the year as well as reporting on key economic variables.
By undertaking some fiscal measures now, the federal Liberals are preparing for the 2019 Budget to drive the agenda through to next year’s election. In fact, the projected deficit for 2019-2020 has already increased by nearly $2 billion, lining the government up to make significant new spends during the election year.
- Canada will have a $19.6 billion deficit in 2019, and projects annual deficit declines to $11.4 billion in 2023.
- Our national debt will reach $765 billion by 2023-24.
- The economy is expected to grow by 2% in 2018 and 2019, and dip to 1.6% in 2020.
- The debt-to-GDP ratio is forecasted at 30.9%.
What’s the plan?
The government is trying to build an economic narrative that expands upon the USMCA negotiations by putting three themes in the window:
1. Further emphasis on trade diversification, both internally and externally and through investments in enabling infrastructure for more efficient trade gateways, such as ports, railways etc.
2. Some targeted business tax breaks to generate business investment;
3. An effort to reduce regulatory burdens and increase investment in innovation.
With no real change to the overall track from a fiscal perspective, the government forecasts a lower deficit number but provides no plan to return to balanced budgets.
Three new tax incentives for Canadian businesses have been introduced in an effort to boost confidence and spur competitiveness:
- Allow manufacturers and producers of goods to immediately write-off the cost of machinery and equipment;
- Allow for the immediate write-off of the costs for any clean energy equipment; and
- Permit businesses of all sizes and sectors to write off a larger share of cost of new assets.
The government is also proposing a new strategy for export diversification that will boost international exports by 50% by 2025. This includes:
- Modernizing Canada’s current regulatory framework to consider economic competitiveness;
- Reducing interprovincial trade barriers including:
- Easing the transport of goods;
- Aligning regulations in the construction industry (building codes);
- Harmonizing food regulations and inspections; and
- Facilitating greater trade in alcohol.
- Investing an additional $800m into the Strategic Innovation Fund.
Legislative and regulatory changes:
- The government will introduce legislation to implement the prompt payment of contractors and sub-contractors for federal projects on federal lands.
- The government will also undertake to:
- Create business efficiencies by reducing the regulatory burden and simplifying government regulations.
- Updating and modernizing government regulations.
- Work with industry to develop new regulatory approaches in support of innovation.
- Provide greater clarity and guidance to Canadian firms.
- Harmonize domestic regulations and standards in Canada while promoting international regulatory cooperation.
- Enhancing the Canada Pension Plan (CPP) to give Canadian workers greater income security in their retirement by raising the maximum retirement benefit by up to 50% over time.
- Investing $26.6 million over 6 years for the creation of a new Pay Equity Commissioner.
- Establishes a permanent Advisory Committee on the Charitable Sector, to be led by Canada Revenue Agency.
- Investing $62.6 million over 5 years into the Nutrition North Canada program to improve access to affordable, healthy food in northern communities.
- Extending the Mineral Exploration Tax Credit until 2024.
- Establishing a $773.9 million National Trade Corridors Fund to invest in marine ports, and the busiest rail and highway corridors.
- Investing an additional $100 million over 6 years to CanExport to support businesses in diversifying trade, primarily targeting CETA and CPTPP markets.
- Investing $184 million over 5 years to enhance the Canadian Trade Commissioner Service to support trade diversification, with special support for emerging sectors and agricultural exporters.
- Launching a Centre for Regulatory Innovation.
- Investing $50 million to increase venture capital available to clean technology firms.
- Investing in journalism by:
- Allowing non-profit media to receive charitable donations and issue official donation receipts;
- Providing a local news tax credit; and,
- Introducing a temporary tax credit for subscriptions to Canadian digital news media, effective January 1, 2019.
- Responding to Ontario’s recent cuts to francophone affairs, the federal Liberals are investing $14.6 million over 5 years to create a digital platform for French public broadcasters (TV5MONDE).
- Launching a review with the Financial Consumer Agency of Canada to assess banks’ complains handling processes and the effectiveness of the external complaints bodies by June 2019.