Budget 2022: Flush from booming economy, Feds eye growth with $31B in new spending By: Jordan Press, The Canadian Press Posted: 3:11 PM CDT Thursday, Apr. 7, 2022 Last Modified: 5:56 PM CDT Thursday, Apr. 7, 2022

Hey there, time traveller!
This article was published 06/04/2022 (896 days ago), so information in it may no longer be current.

OTTAWA – The federal Liberals have more than $85 billion in new spending room from a booming economic rebound and plan to spend some of the windfall on a series of measures aimed at keeping the good growth going.

The 2022 budget released Thursday includes more than $31 billion in net new spending over the next five years that is targeted at speeding the flow of goods through the country’s supply chains, boosting housing supply and jolting businesses out of an anemic period of investment.

The new spending has increased the fiscal year’s deficit to $52.8 billion from earlier estimates of $44.1 billion.

Finance Minister Chrystia Freeland framed the spending as a hedge against near-term economic uncertainty created by Russia’s unprovoked invasion of Ukraine and the sixth wave of the COVID-19 pandemic.

But she said the spending is aimed at the long-term as well to address structural issues within the national economy that could hold back growth.

“Canadians understand that post-COVID, our country needs a growth strategy,” Freeland said in an afternoon press conference ahead of the budget’s release.

“We need to pay down our COVID debts and in a very uncertain 21st century Canada really needs an economic plan that is going to allow us to increase our productivity to increase our economic growth.”

It’s why the government is reprofiling $15 billion in existing spending for a new fund designed to lower business investment risk for research and new technologies, $3.8 billion over eight years for a critical minerals strategy, and $450 million over five years to unclog supply chains.

Dennis Darby, president of Canadian Manufacturers and Exporters, said the budget offered help to stimulate innovation and ease supply chain issues, but it fails to address labour shortages: “This is a miss.”

The document also commits to spending money from budgets past by forcing provinces to allocate nearly $7.3 billion in outstanding infrastructure dollars by next March or risk losing the money. Timelines to spend the money have also been pushed back from 2027 to 2033.

Overall, the budget points to a government admitting there are hurdles to Canada’s long-term growth prospects, though falls short of a detailed economic strategy, said Robert Asselin, senior vice-president policy with the Business Council of Canada.

“They are admitting at least that stuff they have been doing is not working. That’s a great start,” he said. “But I think to their own admission, they’re still not sure on where to go next.”

The budget forecasts 3.9 per cent economic growth this year but expects that to slow over the ensuing four years to average 2.9 per cent annual growth in real gross domestic product.

Inflation too is expected to fall from 3.9 per cent this year – an upward revision to December’s fiscal update – before starting next year to fall toward the Bank of Canada’s target of two per cent. The hot pace of price increases was something the government kept in mind while crafting the budget, Freeland said.

Unemployment is expected to stay at a low of 5.5 per cent over the forecast horizon.

Economist Armine Yalnizyan, an Atkinson Fellow on the Future of Workers, said the budget was a missed opportunity invest in health-care workers, for example, to keep workers from leaving the care economy that accounts for one-fifth of GDP, and which other workers rely on.

“You can build the middle class of the next century,” she said. “But only if you decide you’re going to make every job a good job, and make sure there are people there to do that work.”

Total spending is this fiscal year will decline to $452.3 billion, including debt servicing costs, from the $497.9 billion in the preceding 12-month period as emergency pandemic aid measures end.

The Canadian Federation of Independent Business was disappointed that support for small firms was coming to an end, and the Canadian Chamber of Commerce noted the absence of debt relief for businesses could undermine the government’s growth plans.

The budget forecasts the debt as a percentage of the economy will hit 45.1 per cent this year and decline over the coming years, including in a worst-case scenario envisioned in the document.

Randall Bartlett, senior director of Canadian economics at Desjardins, said the government has put some of its financial windfall into the bank for a rainy day given the uncertain environment, and held back on moving ahead with a handful of election promises in this budget.

“There will be some people who aren’t happy ultimately with the budget, I think, as a result, and maybe not understanding why they put that windfall aside, but I think it’s the prudent thing to do,” he said.

Missing from the spending outlook are measures like pharmacare promised as part of the Liberals’ deal with the NDP, nor did the document pump out the full suite of Liberal campaign pledges.

Freeland said more spending would come, calling this the first of four budgets the Liberals expect to deliver before the next federal election, which could happen in 2025 if the NDP prop up the government until then.

“Yes, we will do more things over the next three budgets,” she said. “We will, however, do those additional things, fulfill those further promises within an absolutely responsible fiscal framework.”

To pay for some of the new spending, the government is rolling out a tax on excess profits at banks and insurance companies that the Finance Department expects to reel in $6.1 billion over five years. There is also a warning shot to the country’s top earners that the government plans to change their minimum tax with details later this year.

The Liberals are also promising a spending review to find $6 billion in savings over five years. A progress report is promised for next year’s budget.

This report by The Canadian Press was first published April 7, 2022.