Trudeau Said to Forgo Added Stimulus With C$30 Billion Deficit

Prime Minister Justin Trudeau will post a deficit of about C$30 billion ($22.5 billion) in his first budget next week, signaling he won’t unveil additional initiatives to kick-start the economy, government officials said.

The budget, to be released March 22 by Finance Minister Bill Morneau, will mainly comprise pledges made during and since last year’s election, two governmental officials said on condition they not be identified because the plans aren’t yet public.

A C$30 billion deficit would be triple what Trudeau campaigned on. However it’s in line with an announcement last month that pegged the baseline deficit at roughly C$18.4 billion, before C$10.5 billion in campaign spending pledged for the fiscal year that starts April 1.

The cornerstone of Trudeau’s budget is expected to be the Canada Child Benefit, a new social program that would boost direct transfers to low-income families with children. It was a hallmark of the prime minister’s election campaign. He’s also expected to deliver billions in new infrastructure funding over the next four years, another campaign pledge.

In an interview this month, Trudeau ruled out significant new stimulus funds, citing in part the need to be careful as the country moves deeper into deficit. He and his team have consistently said the country needs investment, but even as oil and the currency dropped in his early weeks in power they have avoided framing it as a stimulus package.

“I don’t think we need massive stimulus,” Trudeau said in the March 2 interview. “What we need are smart investments that are going to help the economy and the families who need it in the short term while creating a path toward greater growth and greater prosperity in the longer term.”

A C$30 billion deficit would be 1.5 percent of gross domestic product. That’s a swing of 1.4 percentage points, from an expected deficit of 0.1 percent of GDP in the current year. Since the end of World War II, there have been only four one-year expansionary fiscal swings of more than 1.4 percentage points of GDP.

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