The deficits will be slightly higher than what Ottawa tabled in the budget: Parliamentary Budget Officer
One of Canada’s largest business groups is calling on Prime Minister Justin Trudeau’s government to pare back stimulus plans, and turn its attention to climate transition goals and innovation strategies to address future economic challenges.
In a five-page letter to Finance Minister Chrystia Freeland, the Business Council of Canada outlined areas of focus for the federal government’s coming budget to spur long-term growth, including a call for more spending discipline to restore the nation’s fiscal capacity.
“Fiscal policy should be used judiciously to enhance Canada’s long-term productive capacity, rather than further stimulating an economy that is already overly dependent on household consumption,” Goldy Hyder, chief executive officer of the Ottawa-based lobby group, said in the letter.
The council represents the CEOs of Canada’s biggest companies. Its proposals include investing in strategies to help Canada meet its 2030 emissions reduction goals, developing an industrial strategy akin to U.S. President Joe Biden’s Build Back Better plan, strengthening the labor force with more highly skilled immigrants, and creating an improved environment for business investment by simplifying the tax codes. Hyder also called on the government to encourage “radical innovation” through a made-in-Canada research projects agency.
At a press conference last month, Freeland said the focus of this year’s budget will be finding ways to boost the nation’s long-term economic outlook to “increase the ability of Canada to grow really, really strongly post-COVID.”
Trudeau’s government ran deficits of almost half a trillion Canadian dollars over the past two years to finance pandemic-relief programs and shore up the economy, but Freeland’s plans to continue spending over the next few years have been more controversial. In her 2021 budget, Freeland allocated $140 billion (US$110 billion) for additional stimulus over five years.
Trudeau also promised $78 billion in new spending during last year’s election campaign, much of which has not been budgeted.
Hyder said all this planned stimulus is no longer necessary and “risks doing more harm than good given that most economic indicators point to an economy that’s already operating closed to full capacity.”
Based on the group’s current trajectory, program expenses as a share of gross domestic product will exceed 15 per cent for the foreseeable future, a ratio not seen since the 2008 financial crisis, he said, and recommended the government adopt a fiscal anchor based on keeping debt-servicing costs below 10 per cent of government revenue.
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