Budget 2023 won’t fuel inflation, but misses the bigger economic picture: experts
Last week’s federal budget won’t fuel inflation but may be missing the bigger economic picture as a recession looms and the country’s cost-of-living crisis continues to squeeze Canadians, experts say.
The budget unveiled by Finance Minister Chrystia Freeland on Tuesday promises to cut more than $15 billion in spending from the government’s books, but also abandons plans from the fall economic statement that projected a map to balanced budget. The federal deficit is projected to decrease by up to $14 billion in the downside scenario by 2027-28 from $43 billion.
“If you look at the size of the deficit that they are projecting going forward, they’re not really adding materially to inflation relative to the path that we were already on,” said Craig Alexander, the former chief economist of Deloitte, in an interview with Mercedes Stephenson that aired Sunday on The West Block.
However, he added, “One of the things I’m worried about is if we get into a recession, which I actually think has a relatively high probability in the near term, the government’s fiscal situation is going to get worse.”
The budget saw Freeland and the government attempting to strike a balance between necessary investments while not pouring fuel on inflation, which remained at 5.2 per cent as of February.
Food inflation is even higher, however, at 10.6 per cent — marking the seventh straight month of double-digit price increases.
The biggest line item on the affordability front — not including health-care boosts and an expanded dental care plan — is $2.5 billion in spending for a so-called “grocery rebate” aimed at lower-income households, as reported by Global News and others ahead of Tuesday’s budget release.
The one-time rebate is expected to deliver $467 directly to a family of four, $234 to a single Canadian without kids and $225 to the average senior.
An estimated 11 million Canadian households are expected to receive the boost via the GST tax credit mechanism, and it does not have to be spent on groceries.
Armine Yalnizyan, an economist and the Atkinson Fellow on the Future of Workers, told Stephenson she wanted to see more measures that will help Canadians deal with affordability and housing shortages.
“There was a lot of talk about how we deal with junk fees for Ticketmaster or how we deal with the aggravation we’re facing at airports,” she said. “These are aggravations. They’re inconveniences. They’re not a matter of hunger or homelessness.”
She added the government missed an opportunity to address reforms to Employment Insurance, which have been promised but are months behind schedule.
Instead, the budget includes $5.4 million to extend the Work-Sharing Program for three years that allows businesses to retain employees at reduced hours in the event of decreased revenues.
“There was this cheery tone about how the best of times are yet to come in the budget,” she said. “But it’s like, what about the times we are in?”
Freeland told reporters in British Columbia on Thursday that the budget reflects the $10-billion housing plan announced in last year’s budget that is still being spent, including a $4 billion housing accelerator program.
Other major items included in the net $43 billion in new spending include clean-tech tax credits to boost the emerging green economy and compete with the United States; an expanded dental care program that balloons the cost to $13 billion; and previously announced health-care deals with the provinces.
Alexander said he supports the investments in what he calls the “care economy” like dental and health funding, as well as the credits for clean tech. But he worries the “shallow recession” predicted by economists surveyed for the budget will make it harder to pay for those programs and keep the economy afloat.
“They’re going to be forced to provide stimulus once again to support the economy, and the government’s fiscal situation is going to deteriorate significantly from where we are today,” he said.
“I think that we actually need to have an adult conversation in this country about the programs that we’re providing and the cost of them — not that we need to cut back those investments. I think we need more investment in the care economy, but we need to do it fiscally responsibly.”
—with files from Craig Lord
by Global News
