For the first seven months of 2010-11, the deficit was estimated at $21.5 billion, down$10.4 billion from that estimated in the same period in 2009-100

Based on the profile of the Economic Action Plan (EAP) funding and one-time accounting adjustments which impacted negatively on the 2009-10 deficit, we estimate that the deficit for 2010-11 should be at least $17 billion lower than that recorded in 2009-10, provided the government does not introduce some last minute accounting surprises. This would mean a deficit of about $38.5 billion for 2010-11, nearly $7 billion lower than forecast by the Finance Department of $45.4 billion in the October update.

Table 1 shows the fiscal impact of the EAP in both 2009-10 and 2010-11.  The net impact of the EAP is estimated to be $6.6 billion lower in 2010-11 than in 2009-10 primarily because of the one-time assistance to the auto sector in 2009-10. Given the recent decision to extend some of the infrastructure spending into 2011-12, the net decline in 2010-11 is likely to be even larger.  In addition, the decision to record the entire Harmonized Sales Tax liability to Ontario and British Columbia and updated actuarial adjustments for pension and health benefits increased the 2009-10 deficit by $5.9 billion and $4.3 billion, respectively.  All other things remaining equal, the deficit for 2010-11 should be at least $16.8 billion lower than that recorded in 2009-10.

Granted, there may be some accounting surprises in the 2010-11 end-of-year accounting period, which could increase the deficit outcome for 2010-11.  But they would have to be very significant and be approved by the Office of the Auditor General.  If these are forthcoming, it is hoped that they would be revealed earlier rather than later.

Economic factors are also working to lower the deficit. Nominal gross domestic product, the broadest measure of the tax base for federal revenue, is projected to be about 6 per cent higher in 2010 than in 2009, which should impact positively on federal revenues. 

In the October 2010 Update of Economic and Fiscal Projections, the Department of Finance forecast that the deficit in 2010-11 would be $11.2 billion lower than in 2009-10.  Given the improvements in the economy to date, as well as one-time factors which raised the deficit in the 2009-10 end-of-year accounting period, we expect that the 2010-11 will be at about $7 billion lower than forecast in the October 2010 Update.

It is interesting to note that the October 2010 Fiscal Monitor was released a week earlier than Fiscal Monitors for other months.  Must have something to do with the Christmas spirit.  Since 2007, there has been a slippage of a week in releasing the Fiscal Monitor (for most months with the exception of the October Fiscal Monitor).