Federal Finance Minister Chrystia Freeland will present a new budget for 2023-2024 with a significantly higher deficit than expected, in particular due to the sharp rise in interest rates to combat inflation and its effects on the Canadian economy as well as the increase in state health transfers.
In her economic statement last fall, Justin Trudeau’s government treasurer planned to reduce the deficit to $30.6 billion between 2023 and 2024.
Instead, we should expect the deficit for the new fiscal year to increase by $15 billion to $20 billion, or in the $45 billion to $50 billion range.
Other support measures
Not only will tax receipts for 2023-2024 fall by billions of dollars compared to Secretary Freeland’s fall forecast, but the Trudeau administration, in addition to meeting its “financial obligations,” will appear to be announcing new financial support measures for low-income households, in accordance with the agreement of the New Democratic Party (NDP).
This agreement with NDP leader Jagmeet Singh allows Justin Trudeau’s minority government to remain in power during the four-year electoral mandate.
New Health Agreement
The new 10-year federal health transfer agreement recently signed with the provinces alone will result in additional spending for the federal government of several billions per year, or even around $3 billion in 2023-2024.
In an effort to provide financial support to low- and modest-income households during this inflationary period, the Trudeau administration may make another additional one-time payment of the GST credit.
Last fall, an additional $2.5 billion was disbursed to approximately 11 million Canadians through a special GST loan payment.
This additional payment could reach $234 for a single person (without children) or $306 for a couple (without children). With one child, the loan increased to $387; with two children it was $467; with three at $548; and with four at $628.
Another measure likely to be offered again to the least affluent in society: the supplement to Canada’s housing benefit. This $500 tax-free surcharge is aimed at households with net incomes of less than $35,000 and those earning less than $20,000 and has reached 1.8 million low-income renters.
Extended dentures?
As part of her new budget, Secretary Freeland will no doubt be “forced” to broaden the circle of beneficiaries of Canada’s new dental benefit. It currently covers children under the age of 12, but several observers believe the benefit will soon also cover those under the age of 18 and the elderly.
The NDP’s sword of Damocles still hovers over the Trudeau government, which is anxious to see if the new budget will allocate concrete amounts to implement Pharmacare. The House Budget Officer estimates the potential cost of this pan-Canadian insurance at about $11 billion a year.
With the cost of living rising, the Trudeau administration is unlikely to dare to raise taxes in 2023-2024.
