Federal government releases economic update for Canada

The Liberal government's fall economic statement acknowledges the cost-of-living crisis weighing on Canadians but offers few new measures to tackle it while pledging to keep deficits in check.

Finance Minister Chrystia Freeland presented her fiscal update in the House of Commons on Tuesday, November 21, stressing the pressure inflation and a slowing economy are putting on federal finances. At a time when the Liberals are facing pointed criticism from the Opposition Conservatives for years of deficit spending, the update outlines new guardrails to demonstrate fiscal restraint.

That includes setting a goal to keep deficits below 1% of the GDP beginning in 2026-27.

The Liberals are also aiming to maintain the current fiscal year's deficit at or below the spring budget projection of $40.1 billion and lower the debt-to-GDP ratio in 2024-25 relative to the projection in the fall economic statement. The new fiscal objectives come as the Liberals face an election in no more than two years' time, with the Conservatives enjoying a healthy, and widening, lead in public opinion polls.

In her speech in the House of Commons, Freeland took aim at Conservative Leader Pierre Poilievre's assertion that the country is falling apart.

“Building a Canada that delivers on the promise of the greatest country in the world will be our work for these next two years—and beyond,” Freeland said, according to prepared remarks. “Canada is not and has never been broken. We are the imperfect but remarkable creation of generations of Canadians who did their part to build a better country—in good times and in tough times, calloused hand by calloused hand.”

The fall economic statement reaffirms the federal government's intention to tie federal infrastructure dollars to housing action by local governments.

Kevin Page, the former parliamentary budget officer, said the fall economic statement is an update on federal finances rather than a mini-budget, as it had been during the COVID-19 pandemic. He said the reality of a slowing economy and high inflation means the federal government has little room to operate.

“There's this enormous economic uncertainty they have to deal with,” Page said. “I think they have to communicate that.”

The federal government projects the deficit for the current fiscal year to come in at $40 billion, largely unchanged from its spring budget forecast, with deficits shrinking, but not disappearing, over five years. The update adds $20.8 billion in new spending since the spring budget over five years, with some new measures designed to boost the housing supply, including rental units and affordable housing.

Freeland also announced $168 million in new spending over six years for programs focused on at saving Canadians money. As part of the Federal Liberal’s economic statement, the government proposed several amendments to the Competition Act in an attempt to improve consumer choice and lower prices.

The economic statement proposes a “crackdown” on predatory pricing and “killer acquisitions.” Proposed legislative changes would also broaden the reach of the law so more private parties can bring cases before the Competition Tribunal and receive payment if they win. The government also wants to make sure that when Canada opens market access to trade partners, Canadian companies are given similar access abroad.

“Going forward, Canada will consider reciprocity as a key design element for new policies, including certain clean economy investment tax credits, federal procurement and federally funded infrastructure projects,” the government announced in the statement. “This includes reciprocal procurement to ensure that countries that do not provide Canadian goods and services with a similar level of market access do not unfairly benefit from access to Canada's markets.”

Other highlights from the economic statement include new details about efforts to reduce junk fees for consumers that were announced in last spring's federal budget. 

Several new measures aim to improve fairness when it comes to Canadian’ banking experiences, including a plan to target fees that institutions charge for insufficient funds in certain accounts, which the fiscal update says “disproportionately” affect low-income people.

The Liberals previously directed the Financial Consumer Agency of Canada to make no-cost bank accounts more accessible and make other features cheaper, including additional debit transactions, online bill payments and e-transfers. The fall statement promises an update on those efforts in the next few months.

Adoptive parents and seasonal workers are also about to get a break, thanks to changes to employment insurance proposed in the mid-year budget update. Parents who adopt a child will be offered a 15-week sharable benefit starting this fiscal year. Surrogate parents will also be eligible for the benefit, which the government estimates will give 1,700 Canadian families per year more time and flexibility as they adjust to new parenthood.

The change is expected to cost $48.1 million over six years, and $12.6 million every year thereafter.

The government is also temporarily offering seasonal workers in 13 economic regions up to four additional weeks of regular EI benefits.  A higher employment rate means some seasonal workers in industries such as fishing and tourism who rely on EI during the off season don't qualify for as many weeks of insurance. The added support for seasonal workers is expected to cost $69.8 million over three years, and would be available for claims established between Sept. 10, 2023 and Sept. 7, 2024.

With files from The Canadian Press