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Federal budget

Federal Fall Economic Statement 2022 - Something old, something new, something borrowed, something … PHEW

November 3, 2022
Jimmy Jean, Vice-President, Chief Economist and Strategist
Randall Bartlett, Senior Director of Canadian Economics

  • High inflation and incomes started the federal fiscal outlook on a positive note. This boosted revenues by $30B higher than in Budget 2022 on average every year of the forecast. Largely as a result, budget deficits are expected to continue to decline, ultimately leading to a surplus in the 2027-2028 fiscal year.
  • But new revenue measures were few and far between. The only new one in the Fall Economic Statement 2022 (FES 2022) is a 2% tax on share buybacks in the hope of spurring investment, similar a policy in the Inflation Reduction Act (IRA) in the United States.
  • There was more on the spending side, however, with an IRA-inspired $6.7B investment tax credit for clean technologies taking the headlines. But there were other measures as well for skills development, affordability and government efficiency, which took total new spending to nearly $25B in the six fiscal years starting in the 2022-2023 fiscal year (excluding the provision for anticipated near‑term pressures).
  • The federal government also noted that the economic outlook has deteriorated since it la st surveyed private sector forecasters in September. To account for downside risks to the forecast, it included a much more bearish downside economic scenario characterized by a deep recession resulting from much higher short-term interest rates. But even under this scenario, the debt-to-GDP ratio will resume declining after a near-term increase.