Federal Budget Delivers on Liberal Campaign Commitments...But Little New for Business

In his inaugural budget, Finance Minister Bill Morneau ushered in a new era of higher federal spending and sizable deficits. It is important to take note of the current context: a Canadian economy that’s still struggling to adjust to dramatically lower oil prices and a generalized downturn in global commodity markets. We should also take account of the federal government’s solid baseline financial position. Even with a string of deficits, the federal debt/GDP ratio is projected to remain essentially flat over the next half decade.

In his inaugural budget, Finance Minister Bill Morneau ushered in a new era of higher federal spending and sizable deficits. It is important to take note of the current context: a Canadian economy that’s still struggling to adjust to dramatically lower oil prices and a generalized downturn in global commodity markets. We should also take account of the federal government’s solid baseline financial position. Even with a string of deficits, the federal debt/GDP ratio is projected to remain essentially flat over the next half decade.

While we support the decision to run bigger budget deficits for the next two years, the extra $100 billion plus in debt that the Liberals are on track to accumulate by the end of the decade does give us pause. What if a US recession intercedes, or interest rates defy market expectations and rise significantly by 2018? Canada’s triple-A credit rating could be in jeopardy if external events do not unfold as the Finance Minister assumes. A faster return to balanced budgets would lessen Ottawa’s fiscal risks over the medium-term.

It must also be said that there is not much in the new Budget to excite the broad business community. Indeed, taken as a whole, Budget 2016 seems to downplay the role of enterprises and entrepreneurs in driving economic and job growth, wealth creation, and innovation. This is a puzzling oversight, one that may reflect the emergence of a “state-centric” view of how a modern economy operates among those who now occupy the corridors of power in Ottawa.

BCBC's analysis of the budget includes a look at the national economic forecast, some key measures included in the budget and what it means for BC.