Final report on 2017-18 spending shows $19B federal deficit last year [UPDATED]
The deficit is slightly smaller than Finance Minister Bill Morneau's prediction of $19.4 billion in last winter's budget
OTTAWA—The federal government ran a shortfall of $19 billion in the last fiscal year, virtually unchanged from the previous year, Ottawa’s annual financial report card shows.
The deficit for 2017-18 was slightly smaller than the federal government predicted in February’s budget.
However, the Finance Department’s fiscal monitor estimated in May the federal books would post a deficit of just $16.2 billion for last year.
To confuse matters, the government says it has changed the way it calculates its pension liability—a fix officials say has been at the top of the list for auditors for years. And that led to revisions of 10 years’ worth of budget numbers.
As a result, the slim surplus Conservatives left with much fanfare in 2014-15 is now noted as a small deficit.
Tax revenues rose year-over-year, but it was less a windfall than what officials described as a “new normal” after the Liberals created a new tax bracket for high-income earners. The Finance Department says there was a $9.9-billion increase in personal tax revenue from the previous year.
Beyond 2017-18, Morneau’s February budget predicted an $18.1-billion shortfall for this fiscal year—a number that’s expected to gradually shrink to $12.3 billion in 2022-23, including annual $3-billion cushions to offset risks.
Following the 2015 election, the Liberal government abandoned campaign pledges to run annual deficits of no more than $10 billion and to balance the books in four years—by 2019.
Instead, Morneau has been focused on reducing the net debt-to-GDP ratio—also known as the debt burden—each year. After the pension-related revisions were taken into account, the debt ratio dropped to 31.3 per cent of GDP in 2017-18, from 32.0 per cent a year earlier.
The latest numbers for 2017-18 pushed the overall national debt to $671.3 billion.
The document didn’t provide a long-term outlook for the debt burden, but officials say internal projections still show the measure on a downward track, even if the numbers have shifted slightly due to accounting changes.
Morneau has cited a weaker-than-expected economy for the bigger shortfalls as well as a need to make investments to lift Canada’s long-term growth.
But the economy has delivered a strong performance for more than a year and the lack of a road map to return to balance has drawn criticism, particularly from the opposition Conservatives.
There are concerns over the Liberals’ deficit-spending plan at a time of economic expansion and warnings it could find itself far deeper down the deficit hole in the event of a recession.