Canada's parliamentary budget officer says Ottawa faces increasing challenges with the structural deficit it has created in the aftermath of the recession.
Kevin Page told CTV's Canada AM that the country's swelling structural deficit is "very manageable" at the moment, but must be kept in check in the long term. Page predicts in his latest report that the structural deficit will reach $18.9 billion in the 2013-14 year.
"It's a small one -- it'll be about one per cent of GDP as you kind of move four or five years out -- but it's something we're going to have to deal with," he said during an interview from Ottawa on Wednesday morning.
That 1 per cent represents the difference between what the government takes in and what it spends.
The issue is how the deficit changes over time.
"The big deficit we're seeing this year -- the $55 billion, plus or minus -- is largely cyclical," Page said, noting the lower revenues and stimulus spending that weighed down the current fiscal year.
In three years' time, most economists believe the Canadian economy will have returned to its full potential. But the country will still have a structural deficit at that stage, Page said, which poses problems.
"The concern is that as you move forward, it will get bigger and bigger," said Page.
Page said Ottawa has the upper hand if it maps out its plan for ending the structural deficit now, rather than letting the problem fester.
"If we can deal with this now, it's very manageable," Page said, suggesting that the structural deficit should be a front-and-centre issue as soon as the next federal budget.
Ted Menzies, the parliamentary secretary to Finance Minister Jim Flaherty, said keeping the structural deficit in check is "a real challenge," though the government remains committed to the plan it has put forward.
He told CTV's Canada AM that once the stimulus package is completed, Ottawa's spending commitments will drop significantly, helping to limit the growth of spending.
"We need to remember that this was a temporary stimulus that we put into the economy and it was for two years," Menzies told CTV's Canada AM, immediately after Page appeared on the program.
"So, when that stimulus is done, that spending is virtually cut in half."
It's a position that echoes what Prime Minister Stephen Harper told Business News Network earlier this week -- that if the government ends its $46 billion stimulus package on time and controls spending, he believes the chances of Canada "getting in a debt-interest payment trap" are minimal.
Overall, Menzies said the government has provided support for those who were hurt by the recession and has a plan to curb the "short-term deficit that this has created."
