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Canada's Surplus Sucked Dry by Economic Slowdown: Report

Red is the new black, according to the Parliamentary Budget Officer.

Jeremy Nuttall 22 Jul 2015TheTyee.ca

Jeremy J. Nuttall is The Tyee's Parliament Hill reporter in Ottawa. Find his previous stories here.

His coverage of Canadian national issues is made possible because of generous financial support from our Tyee Builders. Please consider joining. 

Months after the Harper government released its delayed budget for 2015 showing that Canada had cobbled together a $1.4-billion surplus, the Parliamentary Budget Officer has wiped it away.

The office, an independent oversight bureau, released a report this morning saying that due to the economic slowdown in Canada, government finances are likely headed for a $1.5-billion deficit.

"Budget 2015 on April 21 projected surpluses in 2015‐16 and over the following four years," reads the report titled An update of the Budget 2015 fiscal outlook. "Economic data has since indicated declines in real GDP that were not reflected in the Government’s assumptions."

The office said at that rate on top of this year's deficit, the country will see a $100-million deficit next year and not be in a position for a surplus again until 2017-2018.

It also said that with interest rate cuts and inflation, the damage could drop to a $1-billion deficit this year, and result in surpluses of $600 million by 2017 and $2.2 billion by 2018.

In this year's budget, the Conservatives cut the contingency fund from $3 billion to $1 billion to help achieve its $1.4-billion surplus. The office suggested that further cuts to the fund could be used to minimize deficits.

Canada's transformation from surplus to deficit is due to a 0.6 per cent decline in gross domestic product despite a predicted growth of 1.2 per cent, the report said.

No questions for finance minister

Meanwhile, the Department of Finance today said it has conjured up a $3.9-billion surplus for April and May.

According to a department statement, the extra cash was the result of selling publicly owned stocks and tax increases.

"Revenues increased by $5.5 billion, or 12.8 per cent, largely reflecting increases in income taxes, excise taxes and duties, and the gain realized on the sale of the Government’s remaining holdings of General Motors common shares in April 2015," it said.

The statement said that personal income taxes were up 9.2 per cent while corporate income taxes brought in an extra $500 million compared to the same time period last year.

Finance Minister Joe Oliver made an announcement in Toronto today, but reporters in attendance said they did not have a chance to ask him to put the Parliamentary Budget Officer report and his department's claims into perspective.

"Balanced Joe" did not take questions.  [Tyee]

Read more: Politics, Federal Politics

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