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Global News
a day ago
- Business
- Global News
Canada's economic growth likely to stall in Q2 as trade war bites
The parliamentary budget officer said Thursday he expects the federal government's deficit will balloon this year thanks to ramped-up defence spending — but without a spring budget or more clarity from Ottawa, he can't say for sure. Yves Giroux, the government's fiscal watchdog, issued a new economic and fiscal update Thursday that omits the usual deficit projections for future years. Giroux said in an interview Thursday that the lack of a spring budget leaves him unable to offer a concrete analysis to Parliamentarians about the sustainability of the government's finances. 'Being the parliamentary budget officer, not having a budget is a big gap,' he said. Giroux said his office could use the Liberals' costed spring election platform as a basis for its analysis, but those plans have already shifted just a few weeks into the new government's tenure. Story continues below advertisement Prime Minister Mark Carney announced plans earlier this month to reach the NATO defence spending target of two per cent of GDP this fiscal year with $9.3 billion in new funding — a rapid expansion of his own previous promise to hit those levels by the end of the decade. 9:55 Former Chief of the Defence Staff reacts to spending plans The prime minister also promised $4.3 billion in aid for Ukraine at the G7 summit earlier this week. Get breaking National news For news impacting Canada and around the world, sign up for breaking news alerts delivered directly to you when they happen. Sign up for breaking National newsletter Sign Up By providing your email address, you have read and agree to Global News' Terms and Conditions and Privacy Policy In pre-election estimates that did not account for the impacts of the trade war, the PBO predicted the federal deficit would come in at $42 billion for this fiscal year. Based on new spending announced since then, Giroux said he now pegs that figure at between $60 billion and $70 billion. The final number could be lower, Giroux said, if the government implements cost cutting somewhere this year. But he noted Ottawa's revenues are also under pressure. Story continues below advertisement The PBO expects economic growth to stall in the second quarter of the year as Canada's trade war with the United States sinks exports. The federal government also has introduced plans for a one-percentage-point cut to the bottom income tax bracket, the net cost of which the PBO pegged at $28 billion over five years in a separate report released Wednesday. Giroux said Thursday he also can't properly assess whether the federal government is on track to meet its fiscal targets because the Liberals haven't defined their new budget benchmarks. Carney announced a plan before the spring election to split Ottawa's budget into operating and capital streams, and to balance the operating side in three years. Giroux said in an updated economic and fiscal monitor report that the Liberals haven't yet said what will be included in this operating budget. 1:57 Prime Minister Carney races to dismantle trade barriers before Canada Day 'In the absence of a clear set of criteria as to what would constitute operating versus capital spending, it's not possible to determine whether they would be on track to meet that,' he said. Story continues below advertisement Parliamentarians 'may wish to seek additional clarity' on how the government intends to define these measures and keep federal finances stable, Giroux's report concludes. The government's old fiscal anchors were based on keeping annual budget deficits below one per cent of GDP and maintaining a declining debt-to-GDP ratio over the medium term. The PBO report notes that the federal government could hit its operating budget targets but still see the debt-to-GDP ratio rise due to additional borrowing to fund, for example, accelerated military spending. 'The debt-to-GDP ratio being on the declining trend, it's not clear that would still be met if that was to still be the anchor, considering the recent announcements for defence spending,' Giroux said. The same goes for keeping deficits at one per cent of GDP, he added. The Liberal government has had a busy first few weeks, Giroux said, with King Charles' visit for the throne speech, the G7 summit, the upcoming NATO summit in Europe and a trade war with the U.S. But that's no excuse to not publish some kind of fiscal update, he said. 'We would have expected, at the very least, an economic and fiscal update to be tabled before the House rises,' Giroux said. 'And I'm confident that the good public servants at the Department of Finance would have been able to provide that type of information to ministers for them to table in the House or in another forum.' Story continues below advertisement The PBO does say the federal government's deficit for the last fiscal year likely came in at $46 billion, roughly $4.3 billion lower than estimates in March, thanks in part to higher corporate tax revenues and the imposition of counter-tariffs on the United States. The Canadian Press reached out to Finance Minister François-Philippe Champagne for comment but has not yet received a response.
CBC
a day ago
- Business
- CBC
Deficit to be $4.3B smaller than predicted, but spending plans remain obscure: budget report
Social Sharing The Parliamentary Budget Officer (PBO) says the deficit will be smaller than predicted but the Liberal government's lack of clarity on fiscal planning has left Yves Giroux's office unable to determine if the government's spending plans are sustainable. The Economic and Fiscal Monitor released by Giroux's office Thursday morning says that the deficit for 2024-25 will be $46 billion — $4.3 billion lower than it had predicted during the election and $2.3 billion lower than was estimated in the fall economic statement. "The revision to our estimated deficit reflects a $5.2-billion increase in our estimate for revenues in 2024-25, somewhat offset by a $1-billion increase in our estimate for expenses," the report said. The PBO said that while it predicted the Canadian economy would only grow by 1.8 per cent in the fourth quarter of 2024 and 1.6 per cent in the first three months of the year, real gross domestic product actually grew at an annualized rate of 2.1 per cent and 2.2 per cent. The report said the improved fiscal position of the federal government can be explained by stronger than expected corporate income tax revenues and the money collected from Canada's counter-tariffs on U.S. goods. Improved growth in the first three months of the year, Giroux's office said, can be partly explained by companies rushing to buy inventory before tariffs were imposed. The PBO is predicting that real GDP growth in the second quarter of 2025 will likely remain flat, with an expected decline in exports acting as a drag on the economy. "Business investment is also expected to remain subdued due to elevated uncertainty," the report said. Fiscal sustainability During the election campaign, Prime Minister Mark Carney announced his plan to separate "operational spending" — the day-to-day running of government programs and departments — from "capital spending," which is anything that builds an asset the government holds. The Liberal platform pledged that it would cut the growth of government spending from nine to two per cent by eliminating waste, duplication and deploying technology to balance operational spending by 2028. But the PBO says the Liberal government has complicated its ability to track that fiscal anchor by not fully explaining how it will define operating and capital spending. "Hence the PBO is unable to assess whether the Government's recent fiscal policy initiatives presented in Parliament … are consistent with achieving its new fiscal objective," the report said. Because of the lack of clarity, the government's spending plans could be fiscally unsustainable, Giroux's office said. "Parliamentarians may wish to seek additional clarity regarding how the government plans to measure its fiscal anchor and how it will ensure federal finances remain sustainable.
Ottawa Citizen
a day ago
- Business
- Ottawa Citizen
Budget watchdog raises questions about Carney's defence spending promises
Parliament's spending watchdog can't get specific information about the recently announced military spending boost to verify whether the Liberal government's new initiative will meet NATO targets. Article content The office of Parliamentary Budget Officer Yves Giroux has requested specific details about the massive funding increase, but has so far received little data. Article content Article content 'Since the NATO 2% target is based on actual expenditures — not just plans — and, given DND's historical record of lapses, it is difficult to assess whether Canada will reach the target this fiscal year,' Giroux said Wednesday in a statement to the Ottawa Citizen. Article content Prime Minister Mark Carney announced June 9 that his government would provide $9 billion in new funding for the Department of National Defence over the next 10 months. Combined with defence-related spending from other federal departments, Carney said Canada will reach the NATO goal of spending two per cent of GDP by April 2026. In total, $62.7 billion will be spent on defence and security. Article content But in a June 16 update Giroux's office noted its concerns about the government's initiative. Article content 'A detailed mapping of planned defence spending by both DND and OGDs (Other Government Departments) is necessary to verify the Government's plans,' the office noted. 'PBO is actively seeking related information from the Government, such as whether previous timelines were accelerated, if amounts were newly added to existing projects, or if new projects were created.' Article content Without such basic information, the PBO noted that it was not able to confirm whether the spending would allow Canada to meet NATO's two per cent target in 2025-2026. Article content Article content DND spokesperson Kened Sadiku noted the department regularly exchanged information with the PBO, including last week, when that office was briefed on the details of the June 9 announcement. 'PBO has since requested additional information from the department, which we are now preparing,' Sadiku added in an email. Article content The government has provided some information on the new spending, but few specifics. The funding will go towards pay increases, retention bonuses, support programs, equipment and 'strengthening Canada's relationship with the defence industry,' according to a DND backgrounder.
Time of India
2 days ago
- Business
- Time of India
Will Canada's new tax cut change your life, or just cover your coffee? Here's what you'll save
According to a new report released Wednesday(June 18) by the Parliamentary Budget Officer(PBO), the Liberal government's promised income tax cut is expected to save the average Canadian family $280 next year. However, while the savings may offer some relief, critics, especially those from the Conservative Party, argue that the benefit is too small to make a real difference. The tax cut was first proposed during Prime Minister Mark Carney 's election campaign this spring, lowering the rate on the first $57,375 of taxable income from 15 percent to 14.5 percent, starting July 1, and then to 14 percent next year. For some families, the tax break could help ease everyday costs. But for many Canadians already facing soaring rents, food prices, and interest rates, a few hundred dollars a year may not feel like enough. As one Winnipeg senior told CBC, 'It's something, but it won't change my life.' Relief for the middle class Carney pitched the plan as a middle-class relief measure, estimating potential savings of up to $825 per year for dual-income families. Finance Canada later pegged the maximum savings at $840 per couple. Live Events However, PBO Yves Giroux offered a more sobering view. Because the tax cut takes effect midway through 2025, the average filer will save only $90 this year, rising to $190 in 2026. A closer look at the numbers reveals how unevenly the benefits are distributed A two-income couple with a child in the second income bracket will likely save about $750. A high-earning single Canadian might see $350 back. A single parent in the lowest tax bracket is estimated to save $140. A single senior in the same bracket? Just $50. Minimal impact for low-income Canadians For many low-income Canadians, the impact will be minimal as their taxable income is already offset by credits, and the tax cut brings little change. The PBO noted: " The lower an individual's income, the less they can expect to save." That prompted a sharp rebuke from Pierre Poilievre 's Conservatives, who issued a statement saying, 'This tax cut won't even buy a breakfast sandwich a month for a low-income senior.' They slammed Carney for offering Canadians 'mere cents a day,' calling the move marginal and insufficient. Conservatives still in favour of the tax cut Despite the criticism, the Conservatives said they will vote in favour of the tax cut, but are pushing for more. Their campaign had promised a deeper 2.25-point tax cut, to be phased in over four years. Meanwhile, the fiscal cost of the Liberal plan is significant. The PBO estimates the gross cost at $64 billion over five years, with a net cost of $28 billion once reduced credits are factored in. Finance Canada places that closer to $27 billion. The legislation was introduced via a 'ways and means' motion last month and is set to take effect July 1, though it still awaits final passage in Parliament.
Vancouver Sun
3 days ago
- Politics
- Vancouver Sun
Letters to the Sun: Awarding B.C. Ferries contract to Chinese company is short-sighted
Re: Criticism comes from all sides after B.C. Ferries awards contract to Chinese state-owned company From their perspective, B.C. Ferries found the best value by ordering ferries from China. They didn't consider the value of taxes that would be returned to the government if the contract was awarded to a B.C. builder. They also don't consider the value of the Canadian workers' income being returned to the community. These are real benefits that are not realized when a foreign builder is selected. Surely these factors should be considered. The benefits could be calculated and factored into the Canadian bid. The money the governments receive in taxes from the workers could be returned to B.C. Ferries in order to make up the extra cost of having the ferries made in Canada. Support Canadian workers. A daily roundup of Opinion pieces from the Sun and beyond. By signing up you consent to receive the above newsletter from Postmedia Network Inc. A welcome email is on its way. If you don't see it, please check your junk folder. The next issue of Informed Opinion will soon be in your inbox. Please try again Interested in more newsletters? Browse here. Roger Bryant, Richmond Re: Carney's spending promises will require 'significant cuts' to the public service: PBO The Parliamentary Budget Office exposes its lack of understanding of sectoral balances, and acts as an ideological tool to restrain government expenditures irrespective of the need for adequate deficits to maintain full employment. To ensure fully productive economies, monetarily sovereign governments must fill the spending gap caused by net private domestic sector saving and cash outflows from trade deficits. That is why national governments in prosperous countries usually spend significantly more than they receive in taxes and have national debts that grow in size along with the economies. Evaluation of government spending should be performed by university researchers from various perspectives, rather than by appointed and non-accountable PBO bureaucrats whose pretended neutrality is a ruse that diminishes democracy. Larry Kazdan, Vancouver I write as a resident of Vancouver concerned about the overpopulation of Canada geese in Vancouver parks. It is time to cull the geese. I enjoy walking in Vanier Park and Granville Island. I used to enjoy it much more. Now it's like walking a gauntlet of omnipresent geese and their excrement — on the grass, on the pathways, on the boardwalk. If any of the geese ever test positive for avian flu, the city may well be liable if any residents contract the disease. Think of what class-action lawsuits would cost taxpayers. It's time to start. Summer is here. We need to be able to enjoy our parks. Please, give us some relief from the defecating geese. Barbara Liotscos, Vancouver
