Written by: Elisabeth Saftiuk, VP, Policy & Government Relations
Deputy Prime Minister and Minister of Finance Chrystia Freeland tabled the Government of Canada’s 2022 Fall Economic Statement (FES) in the House of Commons yesterday afternoon in Ottawa. The mini-budget focuses on inflation and the increasing cost of living, while offering a broad spending vision that commits $30.6 billion in new spending over the next six years to help Canadians most affected by rising costs. It also marks the first time the Liberals have forecast a balanced budget since coming into power in 2015.
The federal government tried to connect with Canadians with its FES this year, acknowledging that many are struggling, and business continues to recover after two turbulent years. That said, the update focused on fiscal prudence without articulating a coordinated blueprint to generate the investment required for strong growth.
Inflation has increased sharply across the world over the past year. Global supply challenges and elevated commodity prices continue to contribute to inflation in Canada. Demand continues to outstrip supply in many parts of the Canadian economy. This has resulted in upward pressure on prices. Some of the biggest increases Canadians have seen are on everyday goods, including groceries, fuel, and rent.
High inflation is also affecting business. Inputs, such as raw materials, intermediate inputs and labour are all more expensive. Businesses can try to pass on higher input costs by raising prices, but inflation creates uncertainty that can affect investment decisions. In the long run, this puts downward pressure on productivity, and it prevents businesses, and the economy overall, from growing.
As a growing number of economists forecast an impending recession, Minister Freeland presented multiple scenarios that may play out. The baseline scenario suggests the Canadian economy will grow by 3.2 per cent in 2022, followed by significantly slower growth of 0.7 per cent in 2023 and a deficit of -$36.4 billion.
The downside scenario, which considers high inflation rates sticking around for longer and prompting even tighter monetary policy, places Canada in a “mild recession” next fiscal year and projects GDP shrinkage of -0.9%, with a deficit of -$49.1 billion.
Fall Economic Statement Highlights
The $30.6 billion promised over the years leading up to 2027-28 includes money set aside for the following measures:
- Permanently eliminating interest on federal student and apprentice loans;
- Creating a new, quarterly Canada Workers Benefit with automatic advance payments;
- Creating a new Tax-Free First Home Savings Account, and doubling the First-Time Home Buyers’ Tax Credit;
- Lowering credit card transaction fees for small business;
- Launching the new Canada Growth Fund which will help bring to Canada billions of dollars in new private investment required to reduce emissions, grow the economy, and create jobs;
- Introducing major investment tax credits for clean technologies and clean hydrogen that will help create jobs and make Canada a leader in the net-zero transition;
- Implementing a new tax on share buybacks by public corporations in Canada; and,
- Creating the Sustainable Jobs Training Centre and investing in a new sustainable jobs stream of the Union Training and Innovation Program to equip workers with necessary skills.
Canadian Chamber of Commerce Perspective
The Canadian Chamber of Commerce’s President and CEO, Perrin Beatty, issued the following statement in response to the Fall Economic Statement.
“Today’s Fall Economic Statement was an opportunity for the government to lay out a blueprint for how to create strong, sustainable economic growth. Unfortunately, it seems we will need to wait at least until Budget 2023 for details on a clear plan.
Although we welcome the commitment to fiscal prudence and the commitment to move towards a balanced budget, today’s statement was essentially a placeholder. We still lack a coordinated strategy to generate the investment required for strong growth.
We had hoped to see low-cost growth measures like a plan to eliminate longstanding barriers to interprovincial trade and to substantially reduce the regulatory burden. We also urge the government to produce an integrated plan to get desperately needed food, fuel and fertilizer to global markets.
The Canadian Chamber welcomed the Minister’s announcement of measures to increase the supply of skills needed in our workforce to achieve net-zero and to provide tax credits for investments in clean technologies and clean hydrogen, as well as the commitment to reducing regulatory obstacles to investment in major projects.
Canadian business is anxious to work with the government to produce a comprehensive strategy for growth. Given the headwinds that Canada’s economy currently faces, that strategy is more needed than ever before.
Other Important Links
Fall Economic Statement: https://www.budget.gc.ca/fes-eea/2022/report-rapport/toc-tdm-en.html
Canadian Chamber of Commerce’s Reaction to the Fall Economic Statement: https://chamber.ca/news/still-waiting-on-a-strong-clear-path-to-restore-economic-growth-canadian-chamber-of-commerce/