This should give the opposition some fuel for their fire. After releasing the federal government’s budget for the 2012-13 fiscal year, Finance Minister Jim Flaherty has announced that the federal deficit this year will rise to $26 billion. This is $5 million higher than what was projected in the March budget; and it means that the Conservative government may not be able to meet their own deadline of 2015 of when the country will see a surplus for the year again.
It’s falling commodity prices and decreasing federal revenues from taxes that have the Conservatives deeper in the red than they thought. During the speech regarding the federal deficit, and the government’s latest economic update, Finance Minister Jim Flaherty stated the global economy as the reason why Canada’s budget has taken a hit this year.
“I firmly believe that our government is striking the right balance between returning to balanced budgets over the medium term and continuing to invest in the key drivers of economic growth and job creation,” said Flaherty. “This update recognizes that our country is not immune to global forces. Nor can we control the economic shocks that ripple outwards from other nations.”
The Finance Minister did warn about the European debt and banking crisis, and the looming fiscal cliff in the United States, and urged policymakers in the States and other countries to get their own countries in order. However, Flaherty also took some of the blame here at home for those problems, not for creating them of course, but pointing to the growing household debt that will make us even more vulnerable should global shocks hit.
“A negative external shock to the Canadian economy that would translate into higher unemployment rates could trigger deleveraging on the part of those households holding elevated levels of debt,” the fall economic update also stated.
The update also stated that commodity prices have dropped by 7 per cent since the 2012 budget, and that the federal government projects GDP growth to be at around 3.4 per cent, a drop from the 4.6 per cent that was also stated in the March budget. However, even though the news seems gloomy, it’s important to note that the budgetary balance is adjusted downward by about $3 billion every year, in order to provide a cushion should the country not perform as well as expected.
And that means that the surplus the federal government had expected might be realized after all.