The Peace Tower, shown through the gates of Parliament H (Justin/THE CANADIAN P)
The federal deficit grew to $14-billion with three months to go in the current fiscal year, according to new Finance Department figures.
The monthly Fiscal Monitor report, released Friday, shows Ottawa ran a $1.3-billion deficit in December, 2016, compared with a surplus of $2.2-billion in December, 2015. Over the first nine months of the current fiscal year, the $14-billion deficit compares with a $3.2-billion surplus over the same period the previous year.
Outside observers of Ottawa’s bottom line – including the Parliamentary Budget Officer and the University of Ottawa’s Institute for Fiscal Studies and Democracy – have recently stated that this year’s deficit will likely be smaller than what Finance Minister Bill Morneau projected in his November fiscal update.
Mr. Morneau has not yet announced a date for the 2017 budget, but it is expected to be released in March.
Mr. Morneau’s Nov. 1 fiscal update projected a 2016-17 deficit of $25.1-billion, followed by a deficit of $27.8-billion in 2017-18. The Institute for Fiscal Studies projected a final deficit figure of $21.5-billion this year and $26.9-billion the following year.
The federal government posted a small surplus of $1.9-billion in 2014-15 under the Conservative government after six consecutive years of deficits. The final results for 2015-16 produced a small deficit of $987-million.
The Liberals campaigned in 2015 on a promise to run deficits of no more than $10-billion a year for two years in order to pay for new spending on infrastructure and other promises, before returning to balance before the 2019 election. However, Mr. Morneau has since abandoned the promise of a quick return to surplus.
A report released in December by his department showed that based on current trends, the deficit will not be erased until the 2050s. Mr. Morneau’s upcoming budget will be watched closely to see if the government takes any action to move up that timeline for returning to balance. The government has argued that even under the current scenario of long-term deficits, federal finances are sustainable because the federal debt will shrink when measured as a percentage of gross domestic product.
Friday’s report from the Finance Department provides insight into the trends that have contributed to the deficit.
The government has spent $5.7-billion more so far this year on major transfers to individuals, including a $2-billion spike in elderly benefits, a nearly $1-billion increase in Employment Insurance benefits and $2.8-billion more in children’s benefits because of the government’s new Canada Child Benefit.
Direct program expenses are up $8.9-billion or 11.3 per cent due to increased transfers for infrastructure and other factors.
The government has saved $1.4-billion this year on public debt charges due to lower interest rates.