Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Thursday November 3, 2022
Freeland to release mini-budget today as economists warn a recession is coming
Finance Minister Chrystia Freeland will table her fall economic statement today — a roadmap of what’s to come from the federal government as the economy stands on the brink of a recession.
Prime Minister Justin Trudeau faced some heat when he told reporters during the 2021 election campaign that he doesn’t pay much attention to monetary policy and the Bank of Canada’s mandate to keep inflation at manageable levels.
“You’ll forgive me if I don’t think about monetary policy. You’ll understand, I think about families,” Trudeau said at a Vancouver campaign stop.
But now, with inflation at levels not seen in decades, monetary policy is something virtually everyone in government is seized with as the central bank hikes rates to push down sky-high prices.
Under Canada’s system, monetary policy (interest rates) is set by the Bank of Canada, while fiscal policy (spending) is up to the elected government.
Ontario Liberal MP Marcus Powlowski said that with interest rates so high, “times are changing.”
“I think there’s more of an opportunity to be frugal,” he said. “Any debt we incur is going to grow.”
MP Rachel Bendayan, the associate minister of finance, said the government has been “extremely fiscally responsible” and is “planning on continuing on that track.”
Conservative Leader Pierre Poilievre has made it clear what he wants: no new spending unless there are cuts elsewhere.
Anything else would be “pouring inflationary fuel on the fire,” Poiliere said in question period Wednesday.
NDP Leader Jagmeet Singh said he wants Freeland to address what he calls corporate greed and reform the employment insurance (EI) program.
Freeland has signalled already the government is expecting tough times ahead.
The era of cheap cash is over — rising rates will make it more difficult for businesses to borrow money, which could lead to downsizing and job losses.
The sizeable jump in the Bank of Canada’s policy interest rate — it’s gone from just 0.25 per cent in January to 3.75 per cent today — has also forced the government to rethink how much it will spend.
The cost to service the federal debt is relatively low right now, but it’s poised to increase in the short and medium term.
There are early signals suggesting that Ottawa’s fiscal health in the short term could be much better than predicted, thanks to higher oil prices and the growth in personal and corporate taxes in this era of high inflation.
According to figures released last week through the Public Accounts of Canada, the government’s fiscal ledger, the budget deficit for the 2021-22 fiscal year came in at $90.2 billion — substantially less than the $113.8-billion deficit Freeland projected in her April budget.
In an economic and fiscal outlook published last month, the PBO forecast a budget deficit of $25.8 billion — about 0.9 per cent of GDP — for the 2022-23 fiscal year if the government pursues “status quo policy” — meaning no major new spending on programs. That is significantly smaller than the April budget’s forecast of $52.8 billion. (CBC)
From sketch to finish, see the current way Graeme completes an editorial cartoon using an iPencil, the Procreate app, and a couple of cheats on an iPad Pro …