Canadian Manufacturing

Budget Day 2015: 4 things to watch

The budgetary surplus, plummeting oil prices and the governments GM stock sale will all figure prominently

OTTAWA—The Harper government says the 2015-16 federal budget will be the country’s first balanced fiscal plan in eight years. Here are a few things to look for when Finance Minister Joe Oliver unfolds the budget road map:

How fat is that surplus?

Until last fall, the federal government was thought to be heading toward a comfortable surplus for 2015-16. Then oil prices began their late 2014 free fall—a plunge that chopped crude prices in half between June and mid-winter. The government predicted the price collapse will indirectly starve federal coffers of billions in revenue per year. Observers believe the government had to scramble to achieve balance, something that appeared to be an easy layup only six months ago. Oliver projected a $1.6-billion surplus in November as the oil-price tailspin was only starting to accelerate.

How bad was that oil-price slump, really?

In November, the government predicted the fall in oil prices would drain about $2.5 billion per year out of the federal piggy bank. At the time, the calculation was based on the fact the per-barrel price of crude had tumbled to US$81, from last June’s high of US$107. Since November, oil prices dropped to around US$45 before climbing back up to about US$56. Oliver’s 2015-16 fiscal blueprint should provide an update on how much the government expects the cheaper oil to eat into revenues. A meagre surplus would also provide few fiscal leftovers for the Conservatives’ political rivals to transform into campaign promises ahead of the October election date.

Did they use the $3-billion rainy-day fund?

Since the unexpected decline in oil prices, Oliver has said his budget’s rainy-day reserve could be in play. The budget will show whether the government will have to dip into the fund, which is meant as insurance against surprises such as natural disasters. In its November fiscal update, the Finance Department said it would continue to set aside $3 billion per year for contingencies until 2019-20. Any unused portions will be used to pay down the federal debt.

Did they sell their GM shares for the sake of budget balance?

Earlier this month, Ottawa unloaded its stock in GM for about $3.26 billion, a transaction that came only days after the start of the fiscal year. The timing of the deal ensured the proceeds would boost the bottom line in 2015-16. It remains to be seen whether the sale was the difference maker that helped Oliver nudge the books into the black. Oliver has not said whether the asset value of the shares—whether realized or prospective—was crucial to his 2015 surplus.

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