(OTTAWA) Justin Trudeau gave no indication Wednesday of his government’s intentions to abandon pandemic economic stimulus, as the Parliamentary Budget Officer questions the Liberal approach of spending tens of billions more.
Posted yesterday at 4:27 p.m.
The Liberals had promised up to $100 billion in pandemic stimulus, subject to a series of “fiscal safeguards” — indicators largely tied to the job market. The federal government has put these safeguards in place to determine when the state should end its economic stimulus measures.
However, a report by the Parliamentary Budget Officer (PBO), released on Wednesday, suggests that these indicators have now been met and that all stimulus measures should therefore be removed by Ottawa before the end of the fiscal year in March.
Yves Giroux’s office believes that unless the government has changed its political criteria, there is no longer any justification for the economic recovery plan planned by the Liberals, which could reach 100 billion, according to the Economic Statement of fall 2020.
In a press conference Wednesday morning, Mr. Trudeau dodged questions about “fiscal safeguards”, emphasizing the Liberal strategy aimed instead at attacking the “debt-to-GDP ratio” – the weight of the debt as a percentage of economic activity.
“We will continue to ensure that we keep Canada’s fiscal balance healthy, while being there to support Canadians,” Trudeau said.
“Because, indeed, supporting Canadians through this crisis, supporting workers, supporting seniors, supporting small businesses, (it) leads to better growth and better economic performance once we get through this pandemic. “, he added.
Strong job market
The job market ended 2021 above its pre-pandemic levels, while other indicators suggest that the Canadian economy could return to its former capacity.
However, analysts argue that an abundance of stimulus could add strain to the economy, accelerating consumer spending on highly sought-after goods, many of which are currently in short supply due to supply chain issues in the world.
So Rebekah Young, director of fiscal and provincial economics at Scotiabank, believes the economy is past the point where government stimulus is needed — it could even be counterproductive.
Mme Young expected Ottawa to start signaling its fiscal intentions, in concert with a paradigm shift in measures to ease capacity constraints, helping to drive up inflation rates.
“But these are, at best, medium-term measures,” she said. In the meantime, “it is therefore incumbent on the Bank of Canada to tackle this problem. Perhaps the best case scenario is that the Ministry of Finance at least stays on the sidelines for now. »
Conservative Finance Critic Pierre Poilievre told reporters on Wednesday he wanted to see the Liberals cut spending and not go ahead with the stimulus measures seen in countries like the United States. .
“Just because other governments are wasting their money and driving up the cost of living for their citizens doesn’t mean we have to do the same,” he said.
Watch out for inflation
Statistics Canada reported Wednesday that the annual inflation rate in December hit a 30-year high, and economists believe the rate could rise further.
Robert Asselin, senior vice-president of policy at the Business Council of Canada, said Wednesday that the inflation markers should serve as a warning to the government against pursuing costly short-term spending plans.
“The challenge ahead of us is not to let political errors undermine the impressive recovery we have experienced in recent months,” said Mr. Asselin, former budget adviser to Mr. Trudeau.
Billions in new tax revenue and rising oil prices have given more leeway on the federal books, which the Parliamentary Budget Officer says could fund $57.8 billion in new measures over the next five years .
Mr. Giroux’s office estimated that the remaining expenses, linked to the Liberals’ electoral platform, would amount to $48.5 billion over the same period.
Late financial statements
The PBO’s report on last December’s economic update also indicates that since the start of the pandemic, the government has spent or planned to spend 541.9 billion on new measures, until 2027, of which almost a third (176 .6 billion) are not part of the response plan to respond to COVID-19.
Examination of these expenditures was made more difficult, in Mr. Giroux’s mind, by the late publication of the government’s audited financial statements for the previous fiscal year.
The government kept the documents for two weeks after cabinet approval, even as MPs debated additional spending measures, Giroux said.
He recommended that parliament change transparency laws to require financial statements to be made public no later than the end of September each year.