Liberals to detail preview of federal deficit, spending affected by COVID-19

Liberals to detail preview of federal deficit, spending affected by COVID-19

The federal debt is expected to increase by almost 57 percent from $566.6 billion to $890 billion next year.

The deficit is largely due to record emergency aid spending to offset the unprecedented impact of the COVID-19 pandemic on Canadians and the Canadian economy, which was virtually shut down to curb the spread of the coronavirus.

The anticipated deficit represents a 1,633 percent rise over the $14.66 billion budget shortfall in the fiscal year 2019-20 and 181-fold rise from the $1.41 billion surpluses the Trudeau government inherited from the previous government in 2015.

With tens of billions of dollars committed in spending for seniors, students, loans to businesses and money for employers to help rehire staff, Prime Minister Justin Trudeau says money had to be spent. In a statement, he called for a move away from "a subsidy-based crisis response" to efforts that get Canadians back to work.

It has already paid out about $80bn in individual emergency economic relief, and intends to spend a total of $82.3bn on the wage subsidy programme in the coming year.

The Canadian Federation of Independent Business (CFIB) called the snapshot a missed opportunity to provide certainty for small business owners.

The Liberals expect more workers to move onto the wage subsidy and off the CERB as that program winds down. It is a testament of the shock that COVID-19 had on our economy.

Finance Minister Bill Morneau is set to release what the government's fiscal and economic snapshot looks like this afternoon.

"Our government knew that the cost of inaction would have been far greater", he said.

Nearly 6 million Canadians are out of work, or a third of the workforce, and the government expects the unemployment rate to stay at about 10% for the rest of the year.

These demographics saw higher rates of job loss or reduced working hours.

The Minister says that the federal government has used its strong fiscal position to stabilize the economy and support Canadians by putting in place the largest economic aid package in generations.

"Right now is really the time to be thinking about people and jobs", he said. "And we are the only G7 country without a recovery plan", Scheer said.

Canada and the USA have blocked nonessential travel between the two nations since March and are discussing whether to extend the ban when it expires on July 21.

Finance officials write the pandemic may yet "cast a long-term shadow over economic developments" through higher household debt and persistent unemployment.

Finance Canada provided little insight into when it would begin unwinding the CERB program in particular, saying only that it would "make necessary changes to the program later this summer so people can have the help they need while supporting the recovery".

Related Articles