PBO questions Trudeau on planned stimulus spending
The Liberals had promised up to $100 billion in economic stimulus, subject to a series of spending guardrails to determine whether the economy had recovered enough from the COVID-19 pandemic.
Prime Minister Justin Trudeau is giving no indications of plans to rein in government spending after a critical report by the parliamentary budget officer questioned the Liberals’ case to spend tens of billions in planned stimulus.
The Liberals had promised up to $100 billion in economic stimulus, subject to a series of spending guardrails to determine whether the economy had recovered enough from the COVID-19 pandemic.
Budget officer Yves Giroux’s report released on Jan. 19 said those benchmarks, largely tied to the labour market, appear to have been met. He said that suggests any stimulus should be wound down before the fiscal year ends in March.
Giroux added that the rationale for the planned stimulus of up to $100 billion no longer exists, unless the government has changed the policy yardsticks.
Speaking at a late-morning news conference, Trudeau pivoted away from questions about the spending guardrails, and pointed instead to the Liberals’ plan to keep the debt as a percentage of the economy, known as the debt-to-GDP ratio, on a steady decline.
“We’re going to continue to make sure that we are keeping Canada’s balanced books healthy, while at the same time being there to support Canadians,” Trudeau said.
“Because, indeed, supporting Canadians through this crisis, supporting workers, supporting seniors, supporting small businesses, leads to better economic growth and performance once we’re through this pandemic.”
The labour market ended 2021 having surged past pre-pandemic levels, while other economic indicators suggest the economy may be hitting capacity. Too much stimulus could add strains by juicing consumer spending for in-demand goods, many of which are in short supply because of global supply-chain problems.
The economy is past the stage where stimulus is needed, and may be counterproductive, said Rebekah Young, Scotiabank’s director of fiscal and provincial economics.
Young expected the government to start signalling its budget intentions alongside a shift in tone to investing in measures to ease capacity constraints helping to drive up inflation rates.
“But these are medium-term at best,” she said. “So the onus is squarely on the Bank of Canada to tackle this one. Perhaps the best-case scenario is that the Finance ministry at least sits on the sidelines for now.”
