Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Thursday March 1, 2018
Canada budget holds fire amid NAFTA clouds, focuses on women
Canada’s Liberal government tackled long-term growth challenges on Tuesday in a budget aimed at boosting women in the workforce and diversifying trade, while keeping its fiscal powder dry in case of an economic shock like the demise of NAFTA.
Finance Minister Bill Morneau’s third budget outlined slight deficit improvements without much in the way of new spending, refusing to blink in the face of U.S. corporate tax cuts and trade uncertainty that strike fear into Canadian companies.
“We will be vigilant in making sure Canada remains the best place to invest, create jobs and do business – and we will do this in a responsible and careful way, letting evidence, and not emotion, guide our decisions,” Morneau said in a prepared budget speech.
The budget blueprint, which is bound to be implemented given the Liberal’s parliamentary majority, maintained a C$3 billion ($2.4 billion) fiscal cushion each year to guard against any unexpected event that could hurt the government books.
Even with the cushion, the projected deficit in 2018-2019 declined to C$18.1 billion from C$18.6 billion forecast in October, a restrained target unlikely to have any impact on financial markets or the Bank of Canada’s rate tightening path.
The loss of NAFTA would sideswipe Canada, which sends 75 percent of exports to the United States, and the decision not to slash corporate tax rates in response to the U.S. move puts Canadian companies at a disadvantage.
The unspoken bet is that Canadian exports will benefit from a roaring U.S. economy, even if business investment is lured away by the U.S. tax cuts. Canadian growth is already leading G7 rivals, spurring three rate hikes by the Bank of Canada since July, and the unemployment rate is near a 40-year low.
The budget did not address concerns that voters could come under pressure as rising rates increase the burden of record household debt, which the central bank has flagged as a risk.
Opposition Conservative leader Andrew Scheer blasted Prime Minister Justin Trudeau’s Liberals for maintaining budget deficits far into the future and adding to the national debt.(Source: Reuters)