Deficit to be $4.3B smaller than predicted, but spending plans remain obscure: budget report

The recent report released by the Parliamentary Budget Officer (PBO) has shed light on the federal government’s fiscal situation. According to the PBO, the deficit for 2024-25 is expected to be $46 billion, which is $4.3 billion lower than previously predicted. This news comes as a welcome surprise, especially considering the uncertainties surrounding the economy.

The report also highlighted that the Canadian economy performed better than expected, with real gross domestic product growing at a rate higher than initially projected. This can be attributed to stronger corporate income tax revenues and the revenue generated from Canada’s counter-tariffs on U.S. goods. Additionally, the rush by companies to purchase inventory before tariffs were imposed contributed to the improved growth in the first few months of the year.

Looking ahead, the PBO forecasts that real GDP growth in the second quarter of 2025 will likely remain flat, with a decline in exports acting as a drag on the economy. Business investment is also expected to remain subdued due to elevated uncertainty, according to the report.

One of the key concerns raised by the PBO is the lack of clarity in the Liberal government’s fiscal planning. Despite Prime Minister Mark Carney’s announcement to separate operational spending from capital spending, the PBO has found it challenging to track this fiscal anchor due to the government’s ambiguous definitions. This lack of clarity could potentially lead to unsustainable spending plans, putting federal finances at risk.

In light of these findings, the PBO suggests that parliamentarians seek additional clarity on how the government plans to measure its fiscal anchor and ensure fiscal sustainability. This call for transparency is crucial in ensuring that the government’s spending plans are in line with achieving its fiscal objectives.

Overall, while the revised deficit numbers are promising, the lack of clarity in fiscal planning remains a cause for concern. It is essential for the government to provide clear definitions and measures to ensure that federal finances remain sustainable in the long run.