Daily Times

OTTAWA: Canada’s Liberal government unveiled a stay-the-course budget on Wednesday that targeted export growth and some measure of tax reform but did little to whittle away at deficits even as it backed off from an explicit pledge to improve the debt outlook.

Finance Minister Bill Morneau’s second budget contained few surprises, in line with expectations that Ottawa wants to wait to see what impact U.S. President Donald Trump’s still-evolving policies will have on Canadian competitiveness and trade before committing to further stimulus or tax reform. The budget blueprint, which is bound to be implemented given the Liberal’s parliamentary majority, reinstated a fiscal cushion, effectively a rainy day reserve set at C$3 billion a year to guard against any unexpected event that could hurt the government books, a move economists praise as prudent.

Bringing back the cushion widened the projected deficit in 2017-2018 to C$28.5 billion from C$27.8 billion forecast in November, nearly three times the C$10 billion annual deficit targeted by the Liberals during their 2015 election campaign. But, combined with modest economic assumptions that look easy to beat, the cushion should allow the government to trumpet a better-than-expected performance as it nears the 2019 federal election. Still, the opposition Conservatives said the budget would make life more expensive for Canadians at a time when Trump wants to move in the opposite direction in the United States.

“(It) misses a critical opportunity to respond to Trump’s aggressive move forward to reduce taxes on both businesses and individuals,” interim party leader Rona Ambrose told reporters.

The move to drop an explicit goal of improving the debt-to-GDP ratio over the course of the government’s four-year mandate disappointed economists concerned that Canada is not prepared to rein in deficits after trying to stimulate tepid growth with infrastructure spending and tax cuts for families. “In terms of ‘stay the course’ and ‘do no harm,’ I think the budget achieved those goals, but I would have preferred they’d left an explicit target some sort in terms of debt to GDP declining or ideally a balanced budget,” said Craig Wright, chief economist at RBC.