- Finance Minister under pressure to fulifill campaign pledges
- Stimulus spending tops agenda as economic outlook worsens
As he prepares his first budget amid economic gloom, Finance Minister Bill Morneau is under pressure from key groups to come through on the Liberal government’s election promises -- despite oil and the Canadian dollar plumbing 12-year lows.
Morneau begins a cross-country tour Monday in Halifax. The first-term lawmaker and former pension executive has already tacitly abandoned a pledge to cap his first deficit at C$10 billion ($7.1 billion), as crude sits $17 below what his department forecast seven weeks ago.
Now Morneau faces questions of what cuts may be coming and how quickly he can get stimulus infrastructure funding -- a marquee campaign pledge from Prime Minister Justin Trudeau -- into the economy as Bank of Canada Governor Stephen Poloz warns of “significant and complex economic adjustments.”
“It’s all about actions matching the bold words of Trudeau’s team in the election,” said Gregor Robertson, mayor of Vancouver, Canada’s third-largest city. “They need to be investing urgently in Canada’s cities.”
Funding for transit and housing, in particular, are needed to jump-start the economy even if it means a bigger deficit, Robertson said. Trudeau, whose Liberals ousted Stephen Harper’s Conservatives in October, hasn’t yet detailed his plan for C$5 billion in new infrastructure spending this year.
“He ran on a commitment to invest significantly in this term of office, rather than attempt to starve the Canadian economy with a balanced-budget approach that clearly hasn’t worked well in recent years,” Robertson said. “We need the transit and infrastructure dollars to flow as soon as possible in 2016 to create jobs and not miss another construction season.”
Morneau begins his budget tour in Halifax before events in Montreal, Toronto, Winnipeg, Calgary and Vancouver. It’s a friendly place to start: the biggest city in Atlantic Canada, a region where Trudeau swept all 32 districts and where Liberals run each province. Yet expectations also run high. Many in Halifax want Trudeau to follow through on the Harper government’s shipbuilding plan -- a major job boon for the city -- even if costs rise.
“We just want to be sure. I think there is concern in the community,” said Robert Batherson, chairman of the Halifax Chamber of Commerce, which hosts Morneau on Monday. “We’re counting on the fact that Halifax, and Nova Scotia, were such strong supporters of this government.”
Trudeau took power Nov. 4, after winning a majority government in the Oct. 19 election that ended more than nine years of Conservative rule. He was the only leader to promise a deficit as part of a three-pronged fiscal platform: he committed to running deficits not exceeding C$10 billion annually; reducing the debt-to-GDP ratio; and balancing the budget by 2019-2020. Morneau has since repeatedly avoided committing to the first pledge but stands by the other two, suggesting Trudeau may run a larger deficit in his first year before hurrying back to balance by 2019, when the next election is scheduled.
“We’re going to make significant investments to focus on growth, and we’re going to do that in a way that’s responsible by focusing on bringing down our net-debt-to-GDP, by being prudent, and by getting ourselves to a balanced budget over the course of our mandate,” Morneau said last week in an online forum with university students.
Trudeau’s government has waffled on other files since the election. It will fall short of its promised intake of Syrian refugees. Canadian fighter jets continue to take part in bombing raids against the Islamic State, despite a pledge to pull them out.
It has also made a risky assumption. In a Nov. 20 update, Morneau delivered a set of downward economic revisions and signaled the fiscal situation was worse than the previous government had let on. Yet even the new projections are built on a forecast West Texas Intermediate crude would trade at $50 in the first quarter of 2016 -- about $17 higher than Friday’s closing price.
The finance minister acknowledged the gloomy outlook last week but stuck to his spending pledge. “The challenge is we’re facing lower growth,” Morneau said in the online forum. “We have demographic challenges as well which are an additional headwind on our growth, so it’s in that context that we believe we should be making investments in infrastructure.”
For Vancouver’s mayor, the slump means Trudeau needs to “double down” on infrastructure investment. “The 2016 budget is definitely where the rubber hits the road for the platform commitments,” Robertson said. “Canada’s cities would like to see that investment move swiftly in 2016, and front-end-loading transit and affordable housing are obvious places to start.”