Canada budget seen as 'passive' and 'a place-holder'

The Liberal government of Canadian Prime Minister Justin Trudeau released its 2017 budget on Wednesday. 

Following are comments from economists responding to the government's fiscal blueprint:


"I don't think it puts him (Prime Minister Justin Trudeau) under threat because all the words are there. 

It's a document that talks about great ideas and what Canadians want but it doesn't really put anything tangible in place. Everything is promises. 

So I think it will be enough to sound like the government has good plans but in terms of relief for Canadians there's not going to be much there ... (it's) a budget that is really not going to address a lot of crucial questions that we need addressed at this time."


"This budget is the collision between idealism and reality, the reality that the fiscal situation of the federal government is constrained, that they are still waiting for the impact and fallout of whatever Trump policies will occur in the next number of months. 

You roll those two things up and what you have is a status quo budget which is basically an extension of their first budget... 

I don't think there's much for the opposition to grab on to. 

They're trying to hold the line on the deficit year-over-year. 

If they had created either a bigger deficit hole, or spent money, they would have been targets for the opposition parties, especially the Conservatives, in terms of being big-spending Liberals. 

I think that's why a no-news budget is just much more difficult because the opposition parties are basically shadow-boxing."


"There is a lot of emphasis on innovation and low carbon transition and money to reduce emissions, electricity. 

There is mention of investment in charging stations for electric vehicles, a lot of focus on the low carbon transition, which is not surprising. 

This has been a motif of the Liberal government over the past two years.

"Another component of the budget was C$30 million to the province of Alberta to support improved economic development and the resource sector that's suffering from a bit of a downturn right now.

"In terms of the C$30 million dollars, I think there is going to be a little bit of a disappointment. 

An industry organization suggested that the province would need C$500 million in order to properly deal with wells that are orphaned as a result of company bankruptcies. 

There is a lot of hope that the federal government would put some money aside, certainly more than what was indicated in the budget for this problem.

"On the other items in the budget around energy - having money for innovation and improving energy innovation and things like that, that's attractive for companies. 

But at the same time, it's also a lot of work to try to access that funding, so there isn't going to be a lot of enthusiasm (from the oil-producing province of Alberta).

"The emphasis and the magnitude of money put towards the clean tech and low carbon transition is substantially more than what they have given to Alberta for the resources sector."


"This is a place-holder budget. 

There is very little in this budget that will change economists' forecasts for Canadian growth in the short- or long-term. 

There is very little in this budget that will change market perceptions of the Canadian bond market and there is very little that will change credit rating agencies' concerns, or lack thereof, of Canada.

"That said, that makes a lot of sense and could be the prudent choice. 

The government is missing two pieces of information right now. 

The first one is what U.S. tax and trade policies will look like. 

It's very difficult for Canada to formulate tax policies, trade policies or competitiveness policies if they don't know what their main competitor will be up to. 

We will not have that information until the summer budget in the U.S. at the earliest.

"The second piece of information that's missing right now is the federal government still doesn't know - and economists don't know either - the full impact of last year's announced measures on the Canadian economy. 

So it doesn't make sense to change the game strategy when we still don't know what the impact will be. 

It will probably take another year before we fully understand how effective the measures announced in 2016 were."


"This budget is a passive budget, which is quite understandable, given that we need first to find out if U.S. policies will be positive or negative for Canada. 

There's always a risk in the second half of the year that OPEC may not comply any further with cuts, so maybe the oil price will go back $40.

"It is better to be in reaction mode to any shift in U.S. policies rather than be the front-runner. 

It would be risky and premature to do so, you could lose a lot in terms of tax advantage or deregulation advantage."


"Heading into it, we were expecting a stay the course, do no harm budget and that's basically what we got. 

We've seen the earlier ramp-up in spending effectively has tied their hands in terms of any new initiatives. 

When you look at the new initiatives in today's budget, they are fairly limited because they're pushing against their fiscal capacity.

"The starting point is better than expected, their economic assumptions look conservative or prudent so I think there's some upside risk from the revenue projections based on that. 

They have the explicit adjustment for risk that buys them a bit of space as well. 

In theory, that should suggest any surprises to the fiscal track will be to the downside, i.e. smaller deficits. 

But given recent practice I would suspect if there is any extra money coming in, it will just end up in additional spending rather than getting debt down lower.

"We did start with a target of balanced budgets, then we moved to a target of reducing the debt-to-GDP ratio, and now there's no explicit target of what the fiscal anchor is now. So that's disappointing."


"It's very much a marking-time budget, which frankly I don't see as bad news. 

I think it's perfectly understandable that basically they're almost marking time here and filling in some of the details of the broad brush policies they set out last year.

"Frankly, I think with the economy doing notably better over the last six months or so, it's perfectly understandable that they're standing aside. 

I actually welcome the absence of significant new tax increases, I welcome the fact that they're not bringing out a whole gaggle of new spending measures, so overall I thought it was a reasonable budget given the stage of the cycle.

"The one concern we have is we are well advanced in the cycle and we're still looking at pretty considerable deficits over a five-year period of time. 

You've got to believe there's a reasonable chance that Canada's going to be faced with a North American recession at some point in the next five years. 

Just from a longer-term perspective that's one concern I have with this fiscal plan. ... 

It leaves us in a fairly weak state if we hit some real heavy weather in the economy."