OTTAWA — Stronger-than-expected economic growth, healthy corporate profits and higher oil prices are improving the federal government’s financial position as Parliament begins its fall session.
Prime Minister Mark Carney says Ottawa is now on track to balance its operating budget next year, one year earlier than originally planned. The government has also outlined about $60 billion in spending reductions over five years while emphasizing investment in infrastructure and other projects intended to improve productivity.
Federal revenues increased about 10 per cent year-over-year between April and June, according to Desjardins economist Randall Bartlett, well above the roughly 3.5 per cent annual revenue growth projected in the spring economic update. Strong consumer spending, corporate profits and sustained oil prices contributed to the improvement.
However, Ottawa has also announced substantial new spending and tax incentives. These include a $36-billion, five-year “productivity mega-deduction” aimed at encouraging businesses to invest in machinery, equipment and other productive assets.
Economists say the stronger revenues could help keep the overall deficit outlook relatively stable and improve the debt-to-GDP picture, but they caution that U.S. tariffs and continuing trade uncertainty remain significant risks to Canadian business investment and economic growth.
The Carney government is increasingly emphasizing borrowing for investments expected to strengthen Canada’s productive capacity, arguing that successful projects could eventually generate stronger economic growth and additional tax revenues.