Hey there, time traveller!
This article was published 12/10/2010 (3350 days ago), so information in it may no longer be current.
Ottawa posted the biggest deficit in history last year, Finance Minister Jim Flaherty acknowledged Tuesday while also warning the outlook is so uncertain he is building in a risk margin against future surprises.
Unveiling the government's mid-year report card in Mississauga, Ont., Flaherty said last year's deficit came in at $55.6 billion.
That was $1.8 billion more than anticipated and about $13 billion more than the previous high in 1993-94.
As well, he said, the government is now anticipating economic growth this year and next year will be slower than previously thought.
To guard against further deficit surprises, Flaherty said he is building in a new risk margin worth about $1.5 billion this year and next — totalling about $6 billion over the next five years — to his working assumptions.
The added margin may not be needed, but a sampling of private sector economists suggests it is prudent, Flaherty said.
"In budget 2009, we also took an adjustment for risk and then adjusted later on. So... we would adjust again if it turns out that the adjustment for risk is not necessary," he told reporters.
Unlike in some past years, the government unveiled no new spending or cost-cutting measures in the update.
But Flaherty said the government will still be able to balance the budget in about five years — in 2015-16.
"The plan to bring the budget back to balance will ensure that the federal debt, measured relative to the size of the economy, resumes its downward track by 2012-13," Flaherty told a lunch hosted by the Mississauga Chinese Business Association.
"Our government's commitment to return to balanced budgets stems from our fundamental belief that the private sector.... must be Canada's economic engine of growth, not government."
The balanced-budget projections include a hit of about $5 billion to the treasury from the recent decision to limit hikes to employment insurance premiums.
And it assumes social transfer payments to provinces will continue to grow at the current pace after the agreement runs out in 2014.
"He's missed every deficit target he's ever set," responded Liberal critic Scott Brison, saying Flaherty had squandered his credibility.
The Canadian Taxpayers Federation also reacted negatively to the update, urging Ottawa to cut spending in order to balance the budget sooner.
Even by Ottawa's accounting, the government will add $171 billion — or $10,277 per taxpayer — to the national debt before the books are back in black, the group calculated.
"A family of four tax-filers will have to pay off almost $41,000 due to this spending binge," said Kevin Gaudet of the anti-tax group.
But despite the short-term adjustments, the underlying message of the update was that nothing much has changed since the March budget.
Even the record deficit for last year is more an accounting issue than an indication the government's finances have taken a turn for the worse.
The Finance Department said the high number is mostly due to a one-time cost of $5.6 billion for transitional assistance to Ontario and British Columbia to change to a harmonized sales tax this year.
Had the adjustment not happened, the deficit would have come in under estimates.
And by telescoping all the transfers to one year, Ottawa benefits in the current fiscal year, which will see the deficit about $4 billion less than estimated.
— The Canadian Press