Fiscal Update 2022:
Canada's Fall Budget: Measures for Homeowners, Students, Low-Income Canadians
Investing.com -
Canadian Finance Minister Chrystia Freeland presented the fall budget today, tabled in the House of Commons. The budget posted a $30.64 billion deficit earmarked for spending. The number was lower than the $52.8 billion projected last spring, revised lower due to soaring inflation, higher corporate profits and reduced spending.
Canada's Fall Budget: Measures for Homeowners, Students, Low-Income Canadians© Reuters
The budget also included new measures to aid students, low-income Canadians and homeowners struggling to keep pace with the cost of living.
“We are providing targeted inflation relief because that is the right thing to do, but we cannot support every single Canadian in the way we did with emergency measures at the height of the pandemic,” Freeland noted in the foreword to the document.
“To do so would force the Bank of Canada to raise interest rates even higher. It would make life more expensive, for everyone, for longer.”
Today’s update comes amidst a time of sharply rising interest rates, and decades high inflation.
The relatively conservative measures were a far cry from highly liberal pandemic-era spending measures by Trudeau’s liberals. Economists estimate that measures this year have required a further 25 bps of tightening by the Canadian central bank.
Of the $30 billion in new spending spread over six years, $2.7 billion will go towards the Canada Student Loans and Canada Apprentice Loans, making the loans permanently interest free. The money will be earmarked for the next five years
The budget update also earmarked $4 billion over six years to automatically issue advance payments of the Canada Workers Benefit for those who qualified in the previous year. The benefit is intended to support working, low-income individuals and families.
The government also plans to introduce legislation to launch a Tax-Free First Home Savings Account. The measure is expected to help first-time homebuyers save up to $40,000 tax-free, doubling the First-Time Home Buyers’ Tax Credit.
The budget update also proposes a refundable tax credit for investments in green energy, in line with the Liberal’s target for emissions reduction. It is expected to cost $6.7 billion over five year.
The credit covers electricity generation systems, stationary electricity storage systems that do not require the use of fossil fuels, low-carbon heat equipment and industrial zero-emission vehicles.
The federal government will also launch a Canada Growth Fund that promises to pull in billions in new investments to reduce carbon emissions, and put in place a new tax on share buybacks by public corporations. The measure is expected to boost federal revenues by $2.1 billion over five years.
In terms of what’s next for the Canadian economy, the budget presented two outlooks: a baseline scenario on which the government has based its fiscal planning, and a downside scenario that sees the country enter a moderate recession early next year (in line with economist forecasts, and one which - notably - the government has not based its fiscal planning on.
Investing.com -
Canadian Finance Minister Chrystia Freeland presented the fall budget today, tabled in the House of Commons. The budget posted a $30.64 billion deficit earmarked for spending. The number was lower than the $52.8 billion projected last spring, revised lower due to soaring inflation, higher corporate profits and reduced spending.
Canada's Fall Budget: Measures for Homeowners, Students, Low-Income Canadians© Reuters
The budget also included new measures to aid students, low-income Canadians and homeowners struggling to keep pace with the cost of living.
“We are providing targeted inflation relief because that is the right thing to do, but we cannot support every single Canadian in the way we did with emergency measures at the height of the pandemic,” Freeland noted in the foreword to the document.
“To do so would force the Bank of Canada to raise interest rates even higher. It would make life more expensive, for everyone, for longer.”
Today’s update comes amidst a time of sharply rising interest rates, and decades high inflation.
The relatively conservative measures were a far cry from highly liberal pandemic-era spending measures by Trudeau’s liberals. Economists estimate that measures this year have required a further 25 bps of tightening by the Canadian central bank.
Of the $30 billion in new spending spread over six years, $2.7 billion will go towards the Canada Student Loans and Canada Apprentice Loans, making the loans permanently interest free. The money will be earmarked for the next five years
The budget update also earmarked $4 billion over six years to automatically issue advance payments of the Canada Workers Benefit for those who qualified in the previous year. The benefit is intended to support working, low-income individuals and families.
The government also plans to introduce legislation to launch a Tax-Free First Home Savings Account. The measure is expected to help first-time homebuyers save up to $40,000 tax-free, doubling the First-Time Home Buyers’ Tax Credit.
The budget update also proposes a refundable tax credit for investments in green energy, in line with the Liberal’s target for emissions reduction. It is expected to cost $6.7 billion over five year.
The credit covers electricity generation systems, stationary electricity storage systems that do not require the use of fossil fuels, low-carbon heat equipment and industrial zero-emission vehicles.
The federal government will also launch a Canada Growth Fund that promises to pull in billions in new investments to reduce carbon emissions, and put in place a new tax on share buybacks by public corporations. The measure is expected to boost federal revenues by $2.1 billion over five years.
In terms of what’s next for the Canadian economy, the budget presented two outlooks: a baseline scenario on which the government has based its fiscal planning, and a downside scenario that sees the country enter a moderate recession early next year (in line with economist forecasts, and one which - notably - the government has not based its fiscal planning on.
Fall economic statement slashes growth forecasts but predicts budget surplus by 2027
Author of the article: Stephanie Hughes
Publishing date: Nov 03, 2022
Canada's Deputy Prime Minister and Minister of Finance Chrystia Freeland released the fall economic statement in Ottawa Thursday.
PHOTO BY REUTERS/BLAIR GABLE
The federal government is aiming to strike a balance with targeted new supports and fiscal discipline as it charts a course for Ottawa’s finances over the next few years in the face of soaring inflation and a looming economic downturn.
Ottawa acknowledged in its Fall economic statement Thursday that inflation has risen much higher than projected in the Spring Budget, with the latest CPI reading sitting at 6.9 per cent in September. Interest rates around the world have risen sharply this year to combat these price pressures, prompting a global economic slowdown and expectations that Canada would see its own growth stall next year.
The fiscal update slashes growth forecasts for this year and next from its Spring projections. Real gross domestic product is seen slowing to 0.7 per cent in 2023 from the originally forecast 3.1 per cent. GDP this year is expected to grow 3.2 per cent, down from an earlier forecast of 3.9 per cent.
Against this gloomier economic backdrop, the update stressed that fiscal prudence would be important to mitigate the impact of inflation and ensure the government had the capacity to provide targeted support to Canadians.
The government is now expecting the deficit to shrink to $36.4 billion in fiscal 2022-2023 and to reach a $4.5 billion surplus by fiscal 2027-2028.
However, Thursday’s statement also warned of a downside scenario that would see the budgetary balance deteriorating by an average of around $16 billion per year and adding 3.3 percentage points to the federal debt-to-GDP ratio by 2027-2028 if tax revenues fell, program costs were higher than expected, and if public debt charges rose dramatically.
“I am confident that we have the right approach… in this Fall economic statement,” said Deputy Prime Minister Chrystia Freeland during a press conference. “And what we’re announcing today – what we’ve been doing throughout – is to strike a balance between necessary, compassionate support for Canadians and fiscal responsibility.”
A key part of the update was “new support for Canadians who need it most”, or targeted aid for lower-income Canadians to help them cope with the coming downturn and possible recession.
The government said it would automatically advance Canada Workers Benefit payments for Canadians who qualified for the measure last year — a move that is expected to cost $4 billion over six years beginning in 2022/2023. This measure could provide $714 for single workers and $1,231 for a family split between three advance payments to help cope with rapidly rising costs of living.
The federal government is aiming to strike a balance with targeted new supports and fiscal discipline as it charts a course for Ottawa’s finances over the next few years in the face of soaring inflation and a looming economic downturn.
Ottawa acknowledged in its Fall economic statement Thursday that inflation has risen much higher than projected in the Spring Budget, with the latest CPI reading sitting at 6.9 per cent in September. Interest rates around the world have risen sharply this year to combat these price pressures, prompting a global economic slowdown and expectations that Canada would see its own growth stall next year.
The fiscal update slashes growth forecasts for this year and next from its Spring projections. Real gross domestic product is seen slowing to 0.7 per cent in 2023 from the originally forecast 3.1 per cent. GDP this year is expected to grow 3.2 per cent, down from an earlier forecast of 3.9 per cent.
Against this gloomier economic backdrop, the update stressed that fiscal prudence would be important to mitigate the impact of inflation and ensure the government had the capacity to provide targeted support to Canadians.
The government is now expecting the deficit to shrink to $36.4 billion in fiscal 2022-2023 and to reach a $4.5 billion surplus by fiscal 2027-2028.
However, Thursday’s statement also warned of a downside scenario that would see the budgetary balance deteriorating by an average of around $16 billion per year and adding 3.3 percentage points to the federal debt-to-GDP ratio by 2027-2028 if tax revenues fell, program costs were higher than expected, and if public debt charges rose dramatically.
“I am confident that we have the right approach… in this Fall economic statement,” said Deputy Prime Minister Chrystia Freeland during a press conference. “And what we’re announcing today – what we’ve been doing throughout – is to strike a balance between necessary, compassionate support for Canadians and fiscal responsibility.”
A key part of the update was “new support for Canadians who need it most”, or targeted aid for lower-income Canadians to help them cope with the coming downturn and possible recession.
The government said it would automatically advance Canada Workers Benefit payments for Canadians who qualified for the measure last year — a move that is expected to cost $4 billion over six years beginning in 2022/2023. This measure could provide $714 for single workers and $1,231 for a family split between three advance payments to help cope with rapidly rising costs of living.
It also plans to double the goods and services tax credit payment for an estimated 11 million low- and moderate-income Canadians over the next six months in a move expected to provide $2.5 billion in additional support. Single Canadians without children are expected to receive an extra $234, families can get up to an extra $467 and seniors may receive an extra $225 on average.
The government also plans to move ahead on the Canada Dental Benefit it established in partnership with the New Democratic Party to provide payments of up to $1,300 per child under the age of 12 for families without dental coverage making less than $90,000 a year. The legislation was first introduced in September and the government anticipates this will provide support for 500,000 Canadian children as the government develops a national dental care program by 2025.
An investment of $250 million over five years into employment training starting in fiscal 2023-2024 to prepare Canadian workers for a shifting global economy under its Employment and Social Development Canada program.
The government also plans to lower credit card transaction fees for small businesses by negotiating with payment card network and other financial institutions to lower fees. As of Nov. 3, the government is publishing a draft legislative amendment to the Payment Card Networks Act to make this happen. If the industry fails to come up with an agreement over the next few months, the government will push this legislation forward in the new year to regulate credit card transaction fees.
The government earmarked about $1.16 billion for fiscal 2022-2023 for its top-up to the Canada Housing Benefit previously announced on Sept. 13 this year. The government expects this tax-free $500 payment will aid 1.8 million low-income renters, families with an adjusted net income below $35,000 and single Canadians making less than $20,000.
Following the economic statement, the government plans to table legislation to create the new Tax-Free First Home Savings Account, granting would-be first-time homebuyers a new tax-free tool to save up to $40,000, and double the First-Time Home Buyers’ Tax Credit that aims to provide $1,500 in direct support to home buyers.
Once Canada comes out the other side of the anticipated global slowdown next year, Freeland remains optimistic of the country’s economic prospects.
“So far this year, our economic growth has been the strongest in the G7,” Freeland said. “And when we get through the coming global slowdown with the COVID recession behind us, there is no country in the world better-placed than Canada to thrive.”
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