Minister of Finance Bill Morneau speaks to reporters after leaving a cabinet meeting on Parliament Hill in Ottawa on Feb. 6. (Justin Tang/The Canadian Press)

Trudeau government to table budget Feb. 27 as Canada faces uncertainty

Finance minister’s fall fiscal statement predicted deficit of $18.4 billion in 2017-18

Finance Minister Bill Morneau will introduce the federal government’s next budget on Feb. 27 as the country faces persistent uncertainty around trade and competitiveness.

With the future clouded by such unknowns, private-sector experts will press Morneau to keep his fiscal powder dry when they gather later this week for their annual pre-budget meeting.

Morneau, who announced the budget date Tuesday in the House of Commons, sits down Friday in Toronto with leading economists at a roundtable that typically includes about a dozen experts from commercial banks, think tanks and trade associations.

Finance ministers routinely call on outside economists for input and forecasts as part of the budget-writing process. Their projections are averaged to create a fiscal foundation for the budget.

Some economists say that late-2017 improvements in the economy will likely give Morneau more fiscal elbow room in the budget, compared to his October update. Others are less optimistic about the changes in recent months and expect the government to find itself in a similar budgetary position.

But regardless of the fiscal footing, there’s agreement that the government should proceed with caution. They want Ottawa to make sure it’s ready for the still-unknown impacts of the drawn-out renegotiation of the North American Free Trade Agreement and the U.S. move to slash corporate taxes.

“Those are definitely the big two — there’s no question about it — and the kind of chill that that could potentially put on the business investment climate in Canada,” said BMO chief economist Doug Porter, whose colleague will attend the Morneau meeting in his place

“That’s a tough twosome to deal with.”

Last month, the Bank of Canada highlighted the widening negative impacts of NAFTA’s uncertain future. The bank not only made a point of emphasizing the potential effects on trade, but also the potential damage on business investment caused by uncertainty itself.

The central bank estimated trade uncertainty would lower investment by two per cent by the end of 2019. It said new foreign direct investment into Canada had tumbled since mid-2016 — a possible consequence of the unknowns around trade.

The bank also warned that lower corporate taxes in the U.S. could encourage firms to redirect some of their business investments south of the border.

Business associations fear the U.S. tax changes could end up inflicting more damage on the Canadian economy than the possible termination of NAFTA.

Morneau’s office has responded to the concerns by arguing that Canada has advantages such as an educated workforce and still boasts a competitive tax rate among G7 countries, even after the U.S. reforms. Ottawa is carefully assessing the U.S. tax changes and will take time to fully understand their potential impacts, his office said in a recent statement.

Scotiabank chief economist Jean-Francois Perrault said he doesn’t think the corporate tax changes in the U.S. will have a major impact on Canada — but he admits they could.

Perrault, who will attend Friday’s meeting with Morneau, recommends the government hold off on any big spending plans just in case it needs to respond with tax measures of its own to keep Canada competitive.

“It would be very prudent for the government to wait until we see if, in fact, there is evidence that what’s happening down south in the U.S. is having a detrimental effect on Canadian business,” Perrault said.

Heading into the budget, he thinks the solid economy has given Morneau more fiscal space than he had in the fall.

In October, Morneau’s fall fiscal statement predicted a deficit of $18.4 billion in 2017-18 and a $15.6-billion shortfall in 2018-19.

Perrault, a former assistant deputy minister under Morneau, said he now expects Ottawa to be on track for deficits of $16.8 billion in 2017-18 and $14.8 billion in 2018-19.

On Tuesday, Morneau offered a preview of what the government narrative surrounding the budget will likely sound like.

“We’ve seen real improvements over the last couple of years for middle-class Canadians — more confidence and among the lowest unemployment rates in the last 40 years,” he said during question period.

“But there’s more work to do, Mr. Speaker. On Feb. 27, we’re going to announce the next budget to continue our plan.”

Andy Blatchford, The Canadian Press

Just Posted

Airbnb hosts earning millions in the Okanagan

The Okanagan was among the list of three Canadian wine markets.

Photos: It’s all fun and games at the midway

The carnival is in Penticton at the South Okanagan Events Centre

UPDATE: One dead, two in hospital after Highway 1 crash near Bridal Falls

Closure expected to last hours, while drivers are told to take detours

Pawnshops support curbing crime with digital database

At least two pawnshops in Penticton are in support of upgrading to a digital list of items purchased

B.C.’s devastating 2017 wildfire season revisited in new book

British Columbia Burning written by CBC journalist Bethany Lindsay

Trans Mountain pipeline: Is it worth the risk?

Concerns range from the threat of an oil spill to the impact of tanker traffic on wildlife

Federal leaders trade barbs about India trip at press gallery dinner

Justin Trudeau’s infamous trip to India earlier this year was the focus of many of the jabs

B.C. VIEWS: Our poverty reduction plan is already in place

NDP has another promise it needs to appear to keep

WestJet pilot strike averted as parties agree to mediation

Pilots had warned they could go on strike starting May 19

Out of control wildfire prompts restriction around Allie Lake

One of the first large wildfires of the 2018 season is blazing out of control

UPDATE: Grass fire appears under control near Mission Hill winery

Smoke was around West Kelowna as a fire got underway near Mission Hill

Vernon SAR manager wins national volunteer award

A Vernon Search and Rescue manager was one of those honoured for her dedication and innovation.

Most Read