Kevin Page: Liberals need to explain $40B 'adjustment'
Published Monday, February 22, 2016 8:43PM EST Last Updated Monday, February 22, 2016 8:59PM EST
Canada's former parliamentary budget officer says there are "holes" in the government's newly released deficit projections that are unexplained.
Appearing on CTV's Power Play, Kevin Page said the government took the private sector forecast for Canada’s economy in 2016/17, and then cut an extra $40 billion from the projected growth.
That $40 billion forecast adjustment -- Page called it a “fudge line” -- is based on various risk factors but not clearly laid out.
“It’s really not explained,” he said.
That adjustment leads to an extra $6 billion in lost government revenues that is expected to push the deficit to at least $18.4 billion.
"I teach public finance at a university and we were already looking at these numbers -- and they were only out a few hours -- and my students were looking at them and they were saying, 'I don’t understand the big shifts over the past year,'" said Page.
"There's some holes in the document, and part of it is these forecast adjustments of $40 billion that are not explained, and I'm sure the parliamentary budget officer will be looking at these numbers."
He added the shift in forecast could be giving the Liberals "some room so they can come in a little better than expected."
The $18.4 billion figure is nearly double what Prime Minister Justin Trudeau promised during his campaign last fall. He said Canada would accrue "modest deficits" of no more than $10 billion per year over three years, and would balance the budget by 2019.
Page said the Liberals were right to update Canadians about the deficit and let them know the economy would need some type of short-term and long-term stimulus.
But Page said the documents outlining the budget shortfall did not explain how much of a deficit "is necessary to get the economy going," and how Ottawa would eventually balance the books.
"Sooner, rather than later, we're going to need some talk about how to constrain the size of these deficits," he said.
"You get to a point where you're talking about sizable deficits."
Page said the Liberals are also struggling to explain how to the country's economy got to this point after former prime minister Stephen Harper said Canada would see a surplus in the billions.
The government faced criticism from interim Conservative leader Rona Ambrose on Monday, who said it had "frittered away a surplus" less than 100 days after Trudeau took power.
But Page said the Liberals were dealing with an economy that is "significantly weaker."
"If you go back to budget 2015 and you say, 'How big was the economy?' they were projecting for 2016 for the economy to be at $2.1 trillion, and now if you go to Minister Morneau's document he is saying it is going to be less than $2 trillion," said Page.
"We've taken five per cent out of the economy from a planning perspective, so it is a much weaker economy."
Page also said 2015 projections showed the economy would grow at a rate of two per cent, but instead ended up being one per cent. And projections of two per cent growth in 2016 have already been slashed to 1.5 per cent.
"On a year-to-year basis, the economy isn't really growing," said Page.
"Businesses are not investing. It could be the environment. Even with record-low interest rates people are worried about the world economy slowing (and) now even about the U.S potentially slowing down."
In a fiscal update Monday morning, Finance Minister Bill Morneau said the projected $18.4-billion deficit does not include billions in planned infrastructure spending.
Page said the Liberal's plans for additional stimulus "could make a difference" for Canada's struggling economy.
The former parliamentary budget officer said Ottawa likely believes it needs "to do something now" to jump start the ailing economy and has "fiscal room to manoeuvre."
"Could they put together … a wise package that has growth-enhancing aspects to it, good infrastructure projects -- it could make a difference," said Page.
"Could it happen in a timely way so it could make a difference to Albertans, or people from Saskatchewan or Newfoundland in the next year or two -- it is possible. But again we haven't seen the plan."
However, Page said the government will likely face management challenges in putting the money towards good projects.
In addition to the $18.4-billion deficit for the 2016-17 fiscal year, Ottawa projected a 15.5 billion deficit in 2017-18.
The new outlook is based on an average projected oil price of $40, which has dropped $14 from the government's fall update.
Morneau said the federal budget will be released on March 22.