Canadian Manufacturing

5 things to watch for in Budget 2016

by Bruce Cheadle, The Canadian Press   

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The Liberals aren't trumpeting budget cuts, but their election platform describes finding $3 billion in annual savings by 2019-20

OTTAWA—Federal Finance Minister Bill Morneau will introduce the Liberal government’s first budget today in Ottawa. Here are five things to watch for:

1. The biggest single spending item on the Liberal docket is the new Canada child benefit, a promised $22-billion program that swallows four former benefits—including the universal child care benefit and income splitting—into a single payment targeting middle and lower income Canadian families. The program won’t roll out until July 1, however, as the federal government continues to fine-tune details with provinces amid concerns over clawbacks. With a maximum $6,400 a year per child under five and $5,400 annually for kids six to 17, the working details of the new benefit will be critically important to Liberal messaging on income equality.

2. The Liberals have promised to borrow heavily to finance new infrastructure spending, but how fast the money will roll out and where initial spending will be focused remains a matter of conjecture. Prime Minister Justin Trudeau said last week the initial infrastructure funds will focus on “unsexy” projects such as deferred maintenance, recapitalization and restoring signals on subways. Budget watchers will be examining how the Liberals stickhandle the urban-rural infrastructure divide, the need for productivity enhancing investments and the government’s promise of “green” infrastructure spending.

3. Trudeau confirmed last week in New York that the eligibility age for old age security will be lowered back to 65 from 67, but there remains room for more re-engineering of retirement benefits. The fiscal challenge of an aging population, which the Conservatives attempted to address with the OAS move, remains for the new government _ however, given immediate economic concerns, structural changes may be pushed off to the future.


4. The budget provides an opportunity to eliminate programs favoured by the former Conservative government. The Liberals aren’t trumpeting cuts, but their election platform describes finding $3 billion in annual savings by 2019-20, including through closing tax loopholes.

5. The deficit, according to Morneau, has already ballooned to $18.4 billion before any new budgetary spending is announced, leading to expectations that the Liberals’ promised $10-billion shortfall will be closer to $30 billion in 2016-17. Deficit hawks will be watching the debt-to-GDP ratio (the Liberals promised to keep it on a continuous downward trajectory every year, falling to 27 per cent) and looking for a road map to a return to budgetary balance. Morneau has given himself an unusually large $6-billion contingency cushion that could help the government beat its own projections.


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