WATCH: Budget delivers reforms, 3 per cent deficit, extra-budgetary revenues
A Liberal government plan to eliminate the public debt over the next 40 years with roughly half that time spent servicing it has been tossed aside in favor of a boosted bottom line to prop up the economy.
The dollar value of the government’s deficit will be lower by $4.8 billion than what was foreseen in the October budget. EBITDA is projected to grow by $1.9 billion, in part due to the strengthening of the Canadian dollar. Despite the steep increase, the federal government’s balance sheet will nonetheless emerge healthier over the coming years.
Canada’s corporate tax rate was reduced by 10 percentage points, from 15 to 11.5 per cent, in the wake of the federal Liberal victory last fall. There are also expected to be more tax-free allowances for small businesses, zeroing out an earlier 10 per cent reduction to the federal tax rate.
Pension contributions by CPP and OPSEU members are expected to be capped at $10,000 a year over a five-year period.
The federal Liberal budget delivered in late 2018 also faced significant revenue shortfalls. Despite this, the federal government’s audited deficit for the 2018-19 fiscal year is now projected to be $21.9 billion, down from $31.2 billion in the fiscal year ended March 31, 2018.
The Quebec government’s latest projection is decidedly optimistic when it comes to boosting the province’s own bottom line.
Quebec’s sixth and final budget update maintains Quebec’s low GDP growth for this fiscal year and next, matching recent official government estimates from other provinces. For 2019-20 and 2020-21, budget year, the government’s figure for Quebec’s economy sits at just under 2 per cent.
This amount remains far below the historically average pace of inflation.
The latest Quebec update projects 6.5 per cent GDP growth for 2019 and 2020. Unlike previous budgets, it projects no expenditure growth, with about half of the surplus from the increased level of GDP growth now finding its way into the province’s own coffers.
The province’s public sector workers will be among the hardest hit by those cuts. Retiring employees will see their pension contributions capped at $10,000 annually over the next five years. The former ceiling on contributions for retired public employees — $32,000 — is expected to be abolished. For those retired who continue to work, pension contributions are expected to go down.
More than 33,000 of the province’s overall 68,000 pensioners must choose between a new hybrid plan of defined benefit and defined contribution payments to ensure the pension system remains sustainable. The government says its new plan would save taxpayers nearly $1 billion over a five-year period.
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Quebec’s older residents are slated to benefit from a $155 million surplus in the province’s elderly living rates fund.
Health spending will continue to rise, but at a slower rate than in previous years. At $14.4 billion, the health budget accounts for nearly a quarter of all provincial spending.
The province will spend nearly $2 billion over the next four years to purchase unlisted government land to build affordable housing for the elderly.
Even so, the budget projects the province will still need to borrow $50 billion over the coming year to help deal with future debt service and make necessary infrastructure investments.