The Parliamentary Budget Officer and the government of Canada appear to be using two completely different crystal balls as they attempt to sketch out the country’s finances over the next five years.
In an assessment released Tuesday morning, the PBO — responsible for providing non-partisan financial analysis for Parliament — says the Liberal government under Prime Minister Justin Trudeau is relying on too rosy an outlook, especially for the years 2019-20 and 2020-21.
While the government’s fiscal outlook predicted a budget surplus of $1.7 billion in 2019-20, the PBO is forecasting a $4.6 billion deficit. That’s a gap of $6.3 billion.
The chasm opens even wider for the following year, with the government hoping for a $6.6 billion surplus and the PBO saying Canada will instead be $4.2 billion in the red.
Relative to gross domestic product (GDP), the differences in outlook amount to 0.3 per cent of GDP in 2019-20 and 0.4 per cent of GDP in 2020-21.
“On balance, the outlooks for the budgetary balance between 2015-16 and 2018-19 are similar,” the PBO’s assessment notes.
“The difference in budgetary balance projections over 2017-18 to 2020-21 stems from the government’s more optimistic outlook for revenues from personal and corporate income taxes … as well as the Goods and Services Tax (GST).”
During the federal election campaign, the Liberals promised deficits of no more than $10 billion a year over the next three years before achieving a balanced budget starting in 2019. As he released his first official economic and fiscal update in mid-November, Finance Minister Bill Morneau said his party intends to keep the promises it made.
On Tuesday afternoon, Morneau released a statement in response to the PBO’s report. He said his November fiscal update “provided a realistic and sound assessment of Canada’s economic and fiscal position.”
The government based its numbers on the average of private sector economic forecasts and “included a downward forecast adjustment to the private sector outlook, given ongoing global economic uncertainty,” Morneau said.
“In the government’s view, the forecasts generated by private sector economists, along with historical and year-to-date results, remains the best basis for economic and fiscal planning.”
Comparison of outlooks for the budgetary balance ($ billions)
PBO
2015-16 = $1.2 billion surplus
2016-17 = $3 billion deficit
2017-18 = $4.7 billion deficit
2018-19 = $5 billion deficit
2019-20 = $4.6 billion deficit
2020-21 = $4.2 billion deficit
Finance Canada
2015-16 = $3 billion deficit
2016-17 = $3.9 billion deficit
2017-18 = $2.4 billion deficit
2018-19 = $1.4 billion deficit
2019-20 = $1.7 billion surplus
2020-21 = $6.6 billion surplus
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