Justin Trudeau’s government, which has delivered the biggest COVID-19 fiscal response in the industrialized world, announced plans for another dose of stimulus and vowed to continue priming the economy as long as needed.
Finance Minister Chrystia Freeland unveiled $51.7 billion of new spending over two years in a mini-budget Monday, led by an enhanced wages subsidy for business. Freeland also pledged, without detailing, another $70 billion to $100 billion of additional stimulus over three years to spur the recovery.
That spending isn’t in the fiscal framework, with Freeland promising to deliver it as needed going forward. Her plan signals the Canadian government isn’t straying from its “whatever it takes” mantra on spending.
But the finance minister clearly heeded calls for fiscal prudence. She put off any major structural spending announcements, promised any additional stimulus will be temporary and introduced new taxes on digital giants to help pay for it all.
“Our government will make carefully judged, targeted and meaningful investments to create jobs and boost growth,” Freeland said in the Ottawa legislature. It will provide “the fiscal support the Canadian economy needs to operate at its full capacity and to stop COVID-19 from doing long-term damage to our economic potential.”
Freeland revised higher the nation’s projected deficit this year to $381.6 billion, or 17.5 per cent of gross domestic product. That’s up from a deficit of 1.7 per cent of GDP last year. No major economy will show a bigger fiscal swing in 2020, according to estimates from the International Monetary Fund.
The Close Ottawa is prepared to pump and prime the economy for the next three years: Former PBOVolume 90% Ottawa is prepared to pump and prime the economy for the next three years: Former PBO
Kevin Page, president and CEO of the Institute of Fiscal Studies and Democracy and former parliamentary budget officer joins BNN Bloomberg to provide his reaction to Ottawa’s fiscal update. He notes the document is like “nothing he has seen before” and focuses on forward guidance.
The gap is projected at $121 billion next year, before any additional stimulus. In total, spending linked to the government’s COVID response accounted for $275 billion of this year’s deficit, and $51 billion next year.
Source: Kait Bolongaro | Bloomberg News
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