Freeland to present housing-focused fall economic update Tuesday

Canada's Finance Minister Chrystia Freeland will unveil a much-anticipated fall economic update on Tuesday and CTV News has confirmed it will include billions of dollars in loans to increase housing supply, as well as tax reforms targeting short-term rentals, while trying to strike a tone of fiscal restraint.

Given the Liberals' recent focus on finding federal savings and economists warning of a slowing economy amid high inflation, the annual economic presentation is not expected to be a big spending package or a "mini-budget" as past Liberal fiscal updates have been.

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Rather, the sources CTV News has spoken to are framing Tuesday's presentation as a "very focused" and "slim" checkpoint on Canada's finances and the current government's plans to create jobs and grow the economy.

It is also meant to be a continuation of the Liberals' current priority of addressing affordability, and reflect the need to make choices about where to spend, sources said, offering not-for-attribution intel ahead of Freeland's tabling.

Speaking to reporters ahead of a Tuesday morning cabinet meeting, Prime Minister Justin Trudeau said he knows Canadians are having a "tough time right now" and there will be announcements on this front, in this afternoon's update.

"We're stepping up massively on housing in ways that are going to help people, both buyers and renters right across the country in the coming years, as we build more supply," Trudeau said.

"We're going to be moving forward on more competition measures to keep the prices of groceries in the affordable range. And we're also moving forward on jobs and careers with a green industrial strategy that's going to help Canadians for decades to come." 

WHAT TO EXPECT

As of Tuesday morning, CTV News has confirmed with its sources that the following measures will be in the financial document:

• Opening up $15 billion in 10-year, low-interest loans to build 30,000 more rental housing units across Canada, via the Canada Mortgage Housing Corp. (CMHC);
• Cracking down on short-term rentals such as AirBnb and Vrbo properties in 2024 by no longer allowing property owners to claim income tax deductions on rental expenses for their short-stay properties in regions where short-term rental restrictions are in place;
• A $1-billion affordability-focused housing fund, supporting seeing more homes built;
• New mortgage guidance for lenders that will set expectations for homeowners regarding renewals; and
• An update on pre-committed clean technology measures such as the investment tax credit for carbon capture.

BIGGER POLITICAL, ECONOMIC PICTURE

Freeland's update — including government spending since the spring federal budget, the overall Canadian economic outlook and key financial projections — comes at a dire time politically for the Liberals, with both Trudeau trailing Conservative Leader Pierre Poilievre and overall national sentiments of feeling less well off now than one year ago.

It's likely the federal cabinet will look to Tuesday's "FES" to help turn the tide and convince Canadians that the minority Liberals are accurately attuned to their economic concerns and are the best-placed political party to respond to their cost-of-living constraints.

Though, with Freeland speaking increasingly about this being a time to show fiscal restraint, it remains to be seen how much new money the Liberals can responsibly roll out through this update without further exacerbating inflation and hindering the Bank of Canada's interest rate efforts.

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"It's going to be a tough one for the minister, I have to say… She's got some real problems to deal with here," former federal finance minister John Manley, now senior advisor at Bennett Jones, said.

"She has to deal with, clearly, the housing shortages, the pressure from the NDP on a pharmacare program, lots of spending requests from other ministers. And at the same time, we're seeing interest rates going up… That means you've got to try and turn back some of the spending. So that's a tough balancing act. We'll see whether she can pull it off."

It's possible Freeland will look to stitch in a series of policy-based and promised legislative changes, rather than new money announcements, into Tuesday's update as the way to signal to Canadians that the federal government plans to support them through these economically uncertain times, while likely continuing to point to Canada having the lowest debt-to-GDP ratio in the G7.

Ahead of the update, the federal NDP has signalled it wants to see affordability-centric new spending, while the federal Conservatives want to see a path back to balanced books, while forecasting Freeland's late afternoon presentation will be "more of the same inflationary spending, housing photo-ops and promises and glitzy deficits."