The Liberal government is confronted with a sluggish economy and a challenging position in the polls as it prepares to present its 2024 federal budget on Tuesday.
In anticipation of April 16, Global News interviewed Canada’s former parliamentary budget officer, who anticipates a constrained spending plan with few surprises or significant relief measures for Canadians grappling with the cost of living.
Heading into the third budget within the current government’s mandate, Justin Trudeau’s Liberals have been touring the country, advocating a series of measures slated for inclusion in next year’s spending plans.
Over late March, the Liberals have unveiled approximately $37 billion in new spending and loans intended for the federal budget, as per a Global News analysis. A substantial portion of this spending is earmarked for the Canadian housing market, aiming to stimulate supply growth and implement policies supporting renters and prospective homebuyers.
Beyond housing, Ottawa plans to introduce a national lunch program, allocate billions for expanded childcare access, bolster defense spending and the artificial intelligence sector, and establish a youth mental health fund.
Finance Minister Chrystia Freeland has committed to maintaining the federal deficit at its current level of $40.1 billion. However, Kevin Page, Canada’s former PBO and president of the Institute of Fiscal Studies and Democracy at the University of Ottawa, notes the challenge the Liberals face in balancing the deficit while addressing Canadians’ needs amidst a sluggish economy.
Although Canada narrowly avoided recession in 2023, subdued growth persists due to increased interest rates, resulting in lower government revenues and higher debt costs.
Maintaining fiscal anchors is emphasized in an RBC economics report, as deviating from them could jeopardize Canada’s strong sovereign credit rating, leading to potential downstream effects on borrowing costs for households and businesses.
To address revenue shortfalls, the government may consider tax hikes, though Freeland has assured no new taxes for the middle class in the upcoming budget.
Political polling indicates a challenging landscape for the Liberals, with the Conservatives leading by 18 points and the NDP closely trailing. To regain ground, the Liberals must staunch their losses to avoid slipping into third place.
While a federal election is scheduled for no later than October 2025, Page anticipates a modest budget this year, reserving significant items for a potential pre-election budget in 2025. With economic recovery anticipated by next year, rising revenues could bolster the Liberals’ electoral prospects, potentially restoring confidence in the government.
