March 2012
Deficit for 2011-12 to be Lower than Forecast in Budget 2012
The January 2012 Fiscal Monitor, released with Budget 2012, reports a surplus of $1.7 billion in January 2012, compared to a deficit of $0.3 billion in January 2011. This improvement was largely due to the recording of a $1.6 billion receivable from the province of British Columbia for the repayment of the federal transitional assistance resulting from BC's decision to withdraw from the Harmonized Sales Tax. Without this extraordinary adjustment, the January 2012 surplus would have been only $0.1 billion, an improvement of $0.4 billion from the same period in 2011.
Read MoreFEDERAL DEFICIT IS FALLING MUCH FASTER THAN FORECAST
The underlying deficit could fall to $23 billion in 2011-12 and to $17 billion in 2012-13
On Friday March 2nd, Statistics Canada released its first estimate for economic growth for the fourth quarter of 2011 and for the calendar year as a whole.
Nominal Gross Domestic Product (GDP), a proxy for the federal government’s tax base, increased by 5.8 per cent in 2011 to almost $1.8 trillion. This was $27.7 billion higher than the estimate used in the November 2011 Economic and Fiscal Update.
Read MoreSOME THINGS WE WOULD LIKE TO SEE CHANGED IN THE 2012 BUDGET ("optimism over experience")
There are four issues we would like to see changed in the upcoming budget. We have written on these in previous blogs. They are summarized here, in the hope (faint) that changes will be made.
A more realistic Adjustment for Risk
We applaud the Minister’s decision to include an “adjustment for risk to revenues”. However, we feel that this adjustment should increase over time, rather than decline, reflecting the greater degree of uncertainty in the economic and fiscal projections as one moves forward in time.
Read MoreTHE MAIN ESTIMATES AND THE BUDGET - NO TRANSPARENCY AND NO ACCOUNTABILITY
The President of the Treasury Board tabled the Main Estimates for 2012-13 on February 28, 2012, approximately one month in advance of the tabling of 2012 Budget scheduled for March 29th. The President of the Treasury Board indicated that, given that the Main Estimates are being tabled before the Budget, the Main Estimates for 2012-13 would not include the impact of any of the upcoming proposed spending reductions . This would mean that Parliament would be asked to approve the Main Estimates without any detailed information on the expenditure cuts.
Read MoreJUDGING THE “CREDIBILITY” OF THE 2012 BUDGET
Who decides whether fiscal policy is credible and on what basis do they decide? In our experience, governments usually seek the approval of their fiscal policies from four key groups.
First, governments seek the approval of financial markets because their approval will be critical in determining the cost of borrowing for the government, as well as for other borrowers in the economy.
Read More
