This year’s fiscal update is encouraging with improved economic performance and a commitment to creating a long-term growth strategy; however, specific details are still needed.
Today, the Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance, provided the Fall Economic Update. While fiscal updates are light in policy proposals, the Alberta business community is nonetheless encouraged to see an improving fiscal environment; a commitment to finishing the fight against COVID, especially as the omicron variant continues to emerge across the country; and signals that long-term growth and competitiveness will be on the agenda.
“Today’s fiscal update showed modest improvement in Canada’s fiscal picture—a testament to the resiliency of Canadians—and pointed to the federal government’s coming focus next year on a long-term growth and competitiveness strategy. Both of these are positive,” says Adam Legge, President of the Business Council of Alberta.
“The reality is that Canada remains in a precarious fiscal position with high debt and inflationary pressures, and the only practical path out of that is strong economic growth. To achieve that, we encourage the federal government to implement the recommendations of the Industry Strategy Council report and work with Alberta businesses as a committed partner,” said Legge.
We are pleased to see a modestly improving financial position for Canada and that our economic recovery is on a positive trajectory, coming back more strongly than some might have anticipated. We’ve recovered jobs lost to the pandemic, and the size Canadian economy is on track to reach $2.5 trillion—in line with 2018 predictions. Additionally, this year’s deficit is projected to be $10 billion smaller than anticipated in April at $145 billion (down from $155 billion).
Of the new spending announcements in this update, most of it is dedicated to pandemic responses: $13 billion is committed to finishing the fight against COVID with an additional $4.5 billion provision for any omicron-related responses. We believe it is prudent to plan for costs related to fighting COVID and support Canadians and Canadian businesses through this phase of the pandemic.
Despite the encouraging news, fiscal storm clouds remain on the horizon. Inflation is at an 18-year high, and even though the debt-to-GDP ratio will peak this year and reduce over the coming years, our debt servicing costs remain high and grow, doubling by 2026.
As conveyed in a letter to the Prime Minister outlining Alberta’s priorities, we believe Canada needs to prioritize creating a long-term strategy for growth that builds a stronger, more competitive, innovative, and dynamic national economy. We are glad to see the federal government plan to put significant focus towards this goal; however, we want to see action, which we look forward to in Budget 2022. Specifically, Alberta is looking for tangible action and partnership to: build an innovation economy to support long-term growth; invest in Alberta’s low-carbon future; and address long-term unemployment and workforce transition.