#Federal budget 2021 chart driver#

Targeted clean energy industrial policy, or race to the bottom?īudget 2023 provides $21 billion in net new spending to support the clean energy transition over 5 years with most of the key initiatives providing billions more beyond the budget’s 2028 forecast horizon. Arguably, this is one area where the government could have done a more gradual phase in, perhaps focused on the lowest income households, in order to manage finances in the current uncertain economic environment. Government estimates a cost of $13 billion over 5 years and $4.4 billion on an ongoing basis. This year’s expansion will include all uninsured individuals with household incomes below $90,000.

Introduced last year, the plan originally covered children aged 18 and under and people with disabilities. Second, the government is expanding public support for dental care for low and middle-income families. The initiative is expected to cost $2.5 billion. Roughly 5 million households receive the GST tax credit, benefiting some 11 million Canadians. In practice, this represents a tripling of the GST tax credit households receive that quarter to a maximum of $230 per adult and $121 per child, with an equal tripling of phase-in/phase-out rates to ensure the rebate is distributed across the income spectrum in the same manner. First, the government will be providing a one-time “grocery rebate”, equal to double the existing GST tax credit. Two new spending initiatives stood out in this year’s budget with respect to affordability. Source: Department of Finance Canada, TD Economics. (C$ Billion, Unless Otherwise Specified) Note: Totals may not add due to rounding. Table 1: Federal Budget 2023 Forecast Summary Other major spending initiatives were split across dental care expansion, areas the government identified as cost-of-living measures for households and a continued focus on driving the clean energy transition.

Roughly one-third of that figure was accounted for by the previously announced increase in health care transfers to provinces – amounting to approximately $22 billion through 2028. However, by the end of the budgetary horizon, the larger deficit is accounted for entirely by an increase in program spending.ĭespite an uncertain economic outlook, the federal government eschewed restraint, delivering more than $67 billion in net new spending over 5 years with significantly more over a 10-year time horizon. Weaker revenues are responsible for more than half of the worsening in the deficit in the upcoming fiscal year. The weaker nominal GDP forecast is expected to depress income tax receipts by $4.8 billion over the forecast horizon. The budget also reflects a higher interest rate environment and a lower commodity price environment relative to the FES.Īs a result, budgetary revenues have been revised down by $5.7 billion for fiscal 2023-24 relative to the FES. Finance also outlined an upside and downside economic scenario reflecting the high degree of uncertainty in the current economic environment. Over the 2022-2027 period, nominal GDP is expected to average 4.6% versus 5% in the FES.

#Federal budget 2021 chart driver#

After an 11% rise in nominal GDP growth – a key driver of overall government revenues – there will be a big step down in 2023, with a forecast of only 0.9% (versus 2.6% in the FES) (Table 1). The survey average calls for a shallow recession this year, with a peak-to-trough decline in real GDP of 0.4%. As has been the practice for nearly 30 years, the budget projections are based on an average of private sector forecasts captured in February. The outlook for the Federal budget has worsened since the 2022 FES. Weaker Economic Growth and Increased Spending Swell the Deficit This budget is poised to pass in Parliament due to the existing partnership agreement between the Liberal minority government and the NDP. On the margin, some initiatives could work at odds with the Bank of Canada’s (BoC) attempt to bring down inflationary pressures. But, it’s hard to argue given that a portion of the new spending was already known and supportive of health transfers to provinces, while roughly one-third of spending initiatives are intended to address Canada’s competitiveness during the climate change transition. The main risk to this budget is the potential for a significant economic slowdown that could put government finances on an unsustainable path.