Dec 14, 2021
Tax haul helps feds trim deficits as Omicron clouds outlook
It’s a complicated balancing act with the new variant: Former Parliamentary Budget Officer on the fiscal update
Ottawa is throwing billions more toward the fight against COVID-19 and the threat posed by Omicron in a fiscal update that banks heavily on a strong economic recovery to bolster revenue and shrink deficits.
The Trudeau Liberals are pointing to improvements in the labour market, personal incomes and corporate profits as it forecasts tens of billions of dollars in additional revenue annually through 2026.
For the 2020-21 fiscal year behind us, the deficit now stands at $327.7 billion – almost $27 billion less than forecast in the spring budget. Revenue, as it turns out, came in $20 billion stronger than expected while expenses were $6 billion lower than expected.
That’s enough to clean up the books a bit – but the continued fight against COVID is proving costly.
There is $13 billion in additional spending since the budget aimed at “finishing the fight against COVID-19,” and another $4.5 billion in provisions for any Omicron response this fiscal year.
“As we brace ourselves for the rising wave of Omicron, we know that no one wants to endure new lockdowns,” Finance Minister Chrystia Freeland said in prepared remarks.
“This economic and fiscal update… includes targeted investments that will ensure we have the weapons we need to finish the fight against COVID-19.”
There is $1.7 billion for rapid COVID tests in the fiscal update, and $2 billion for COVID therapeutics and treatments.
And in a twist underscoring the continued challenges of the pandemic, Freeland abruptly shifted plans to present the fiscal update in the House of Commons. The finance minister instead delivered the update virtually after two of her staffers tested positive for COVID, although she tested negative.
In a nod to the persistence of COVID, the previously announced extensions of the wage, rent and recovery benefits in the fall will put another $6.7 billion on the COVID tab this fiscal year.
Add it all up, and the finance department is forecasting a budget deficit of $144.5 billion for this fiscal year – some $10 billion less than in the spring budget.
When it comes to feeding Canada’s economic growth in the years to come, Ottawa is touting the importance of immigration to address labour shortages. The fiscal update earmarks $85 million in the 2022-23 fiscal year to speed up the application process to bring in workers for key industries hit by labour shortages coming out of the pandemic.