OTTAWA, Ont. -- Next year's federal budget surplus will be $1.9 billion, the Finance Department says -- $4.5 billion less than expected, thanks in large part to the Harper government's multibillion-dollar cost-cutting proposals for families.
The expected surplus, unveiled Wednesday in the government's fall fiscal and economic update, is a far cry from the $6.4-billion surplus projected in February's budget.
That's because of the Conservative government's recently announced family-friendly tax and benefit initiatives, which will consume an estimated $27 billion from public coffers between 2014-15 and 2019-20.
The update, delivered in Toronto by Finance Minister Joe Oliver, says Canada is projected to run a $2.9-billion shortfall this fiscal year, matching the government's projection in the federal February budget.
The document also examines the effect of dropping oil prices on the Canadian economy.
Cheaper crude could drain $500 million from Ottawa's bank account this year and $2.5 billion per year between 2015 to 2019, and cut Canada's nominal GDP by $3 billion in 2014 and $16 billion annually from 2015 to 2019, it predicts.
Nonetheless, the federal government is projecting five straight years of surpluses: $4.3 billion in 2016-17, $5.1 billion in 2017-18, $6.8 billion in 2018-19 and $13.1 billion in 2019-20.
In the shorter term, however, it remains unclear whether the Harper government will have enough leftover cash to introduce additional cost-cutting measures for Canadians.
The Conservatives recently announced several big-ticket initiatives directed at families, including an income-splitting proposal that was originally promised during the 2011 election campaign, contingent on a balanced budget.
Prime Minister Stephen Harper has hinted that the government will soon follow through on another 2011 pledge: increasing the annual limit on tax-free savings accounts to $10,000, from $5,500.
The Tories still have an outstanding promise to introduce an adult fitness tax credit, though it's not clear how the government might earmark any leftover surplus cash.
Here are some of the highlights from the fiscal and economic update:
- A small deficit of $2.9 billion expected for the 2014-2015 fiscal year, the same as projected in the February budget.
- A small surplus of $1.9 billion expected for the 2015-2016 fiscal year, much smaller than the $6.4 billion projected last February mainly because of recent announcements for spending increases and tax cuts.
- Surpluses forecast to grow slowly every year after that: $4.3 billion in 2016-2017, $5.1 billion in 2017-2018, and $6.8 billion in 2018-2019.
- Government has set aside $3 billion in contingency funds every year, including the current fiscal year. If not needed, the money goes towards the debt.
- Lower oil prices this year translated into a $500-million hit to the bottom line in 2014-2015, and $2.5 billion per year over the 2015-2019 period.
- Federal debt will rise slightly to $615.8 billion in 2014-2015 before diminishing gradually over the next five years. As a percentage of the economy, the federal debt in 2014-15 is forecast to be 31.5 per cent of GDP, dropping slowly over the coming years to 24.3 per cent in 2019-2020.
- Overall federal tax burden drops to lowest level in 50 years for now, but personal income tax as a percentage of GDP expected to reach 7.1 per cent next year, up from 6.9 per cent this year, and 7.3 per cent in 2019-2020.
- The government has recommitted to introducing balanced budget legislation, a promise made initially more than a year ago in the 2013 throne speech.
- Economists told Ottawa to expect real growth of 2.4 per cent in 2014 and 2.6 per cent in 2015. Those projections were made in September before commodity prices tanked; the government has had to trim expectations for government revenue.
- The employment insurance account has a $3.8-billion surplus in 2014-2015, $3.9 billion in 2015-2016 and $4.5 billion in 2016-17 -- allowing the government to stay in the black despite new spending and tax cuts.