In her second budget, Finance Minister Chrystia Freeland presented what she calls the “most ambitious plan” in Canadian history to build new homes and allow more people to buy their first home. At the same time, Canada has experienced the fastest population growth of the G7 countries thanks to record levels of immigration. It is the serpent biting its own tail.
Currently, Canada is facing a housing shortage: the number per 100,000 inhabitants is well below the average for OECD countries. Ottawa is entrusting the Canada Mortgage and Housing Corporation with $4 billion to accelerate the construction of 100,000 housing units and $1.5 billion for the construction of 6,000 affordable housing units. Of course, this is a partial answer, since housing construction is essentially a private sector task. To remedy the shortage, we want to double the number of new dwellings over the next ten years. It must increase from 200,000 to 400,000 new units per year.
In recent years, the Trudeau government has embarked on an immigration race that has increased the number of immigrants received from 250,000, the threshold before 2015, to 405,000 in 2021, and it will reach 451,000. in 2024. In her budget speech, Chrystia Freeland takes up the accepted idea that a greater number of immigrants necessarily leads to an increase in wealth. It is “a powerful catalyst for economic prosperity,” says the Minister of Finance. However, if there is necessarily a link between a growing population and the size of the economy, the income per inhabitant does not always follow, nor the purchasing power. Talk to renters looking for a home they can afford or young families who can’t afford a first home.
To these first buyers, the Freeland budget wants to provide assistance. It may seem counterproductive to stimulate demand in an overheated market, but it is stressed that the measures will only produce effects in several years.
The war in Ukraine has repercussions. The Minister has provided just over $7 billion more for the Canadian Armed Forces, whose budget, which will reach 1.5% of gross domestic product in 2026-2027, is still far from the 2% target set by the NATO. Ottawa will, however, carry out an in-depth review of its defense policy, which is wise. Rather than reacting to the situation, it is better to properly assess the objectives and needs of the country before taking out your checkbook.
Contrary to what one might expect, the budget did not turn orange: it is not too marked by the agreement between the Liberals and the New Democrats. Yes, Ottawa is implementing a new dental care reimbursement program. With a budget of 5.3 billion over five years, the program is targeted and relatively modest.
The strength of the economy and the effect of inflation have reduced the deficit projected in the 2021 update. The Trudeau government is continuing its strategy of reducing the government’s debt relative to the size of economy and in five years it will almost balance the budget. He could have posted a zero deficit in 2026-2027, but we have to believe that he is allergic to it. And it is true that there is one element missing from this budget: a permanent increase in federal funding for health. Let’s hope it’s only a postponement.