BALANCED BUDGET FOR 2014 CLEARLY WITHIN REACH
The federal deficit for the period 2013-14 was estimated at $12.1 billion, an improvement of $6.6 billion from the same period last year. Although these are not the final results for fiscal year 2013-14, they clearly indicate that the deficit for the year as a whole will be much lower than the Budget 2014 estimate of $16.6 billion and significantly raising the possibility of a balanced budget/surplus in 2014-15, one year ahead of the Government’s commitment. Final audited results for 2013-14, however, will not be released until the fall of 2014.
Total budgetary revenues were up by $13.2 billion in the April 2013 to March 2014 period, exceeding the change of $7.4 billion forecast in Budget 2014 for the year as a whole, by $5.8 billion. Increases in all major components of revenues were larger to date than those expected in Budget 2014. If these gains hold, total revenues could exceed the overall revenue forecast in Budget 2014 by $6 billion.
Program expenses were up $6.8 billion for the April 2013 to March 2014 period, compared to the same period in 2012-13. In Budget 2014, an increase of $4.8 billion was expected for the year as a whole. However, year-over-year comparisons are currently distorted by the timing of bookings for various liabilities and budget measures. In 2012-13, bookings for liabilities amounted to over $3 billion, but were largely recorded at the end of the fiscal year. For 2013-14, bookings of a similar amount have already been recorded. Budget 2014 proposed additional restraint measures totally $1.7 billion, of which $1.1 billion is for the proposed cost sharing of the Public Sector Health Care Plan. It is expected that the annual change in program expenses between 2012-13 and 2013-14 will be in line with that estimated in Budget 2014.
The financial results to the end of March 2014 clearly indicate that the deficit for 2013-14 will be considerably lower than that estimated in Budget 2014. Unless there are some unusual and unexpected end-of-year accounting adjustments, the deficit for 2013-14 could be around $10 billion, instead of the $16.6 billion estimated in Budget 2014. The Parliamentary Budget Officer, in its latest Economic and Fiscal Outlook 2014, forecast a deficit of $11.6 billion for 2013-14. Clearly, the outcome for 2013-14 will be much better than estimated in the last budget.
What impact could the better-than-expected outcome for 2013-14 have on the budgetary balance for 2014-15 and beyond? Some of the better-than-expected outcome for 2013-14 comes from one-time factors, such as the sale of GM shares ($0.7 billion) and Macdonald House in London ($0.6 billion). However, much of the higher-than-expected revenues would be expected to carry forward into 2014-15 and beyond. In Budget 2014, a deficit of $2.9 billion is forecast for 2014-15. As a result, all other things remaining equal, if only $3 billion of the better-than-expected outcome for 2013-14 carries forward to 2014-15, the federal budget would be in balance.