Budget cuts costly to economy

Government spending restraint and cuts will likely lead to balanced budgets but also slower economic growth and 100,000 lost jobs, Canada’s budget watchdog said Wednesday.

OTTAWA — Government spending restraint and cuts will likely lead to balanced budgets but also slower economic growth and 100,000 lost jobs, Canada’s budget watchdog said Wednesday.

Parliamentary Budget Officer Kevin Page’s latest economic and fiscal report is surprising in that it agrees with the Harper government that the budget will be balanced in 2015-16 — maybe even a year earlier.

But it says fiscal soundness carries a heavy price, with Ottawa taking $52 billion out of the economy and the provinces adding another $9 billion of drag.

“The PBO expects that restraint and reductions in government spending on programs in Canada will act as a drag on economic growth and job creation, pushing the economy further away from its potential (gross domestic product) and delaying the economic recovery,” the report states.

Page is due testify before the Commons finance committee on Thursday is eschewing media interviews until after he speaks to MPs. The report, however, was posted on the PBO website Wednesday.

The report says it incorporates Finance Department multipliers on jobs and growth for its projections, and is taking the government at its word that it will limit spending increases while chopping 19,000 public servants.

Ottawa’s planned restraint and reductions in program expenses will reduce its share of the economy from 7.3 per cent in 2010-11 to 5.5 per cent in 2016-17.

That will have a direct impact on the economy, the Page report stresses.

It projects the spending restraints and cutbacks will reduce economic output by 0.3 per cent this year, climbing to 0.88 per cent in 2014.

Canada’s economy, subsequently, will grow by only 1.6 per cent in 2013, eight tenths of a point less than forecast by the Bank of Canada and the private sector consensus.

On the jobs front, restraint will result in about 18,000 fewer jobs this year than had there been no restraint, climbing to 108,000 less employment in 2015. Most of the losses are due to Ottawa’s actions, although provincial restraint is also a factor.

Unemployment, currently at 7.2 per cent, will climb to 7.9 per cent in 2013, the report predicts.

Both scenarios are significantly gloomier that the consensus of economists, which the PBO attributes to calculating a bigger drag from public sector restraint and higher weighting for downside economic risks.

The spending restraint and public service cutbacks — particularly for Ottawa — will have the desired effect on the government’s books, however.

Page predicts the Harper government will indeed be able to balance the budget when it says it will, in 2015-16, and may even achieve the feat a year earlier. As well, Ottawa will come in with a healthy $10.8 billion surplus by 2016-17, about $3 billion more than the budget estimate.

The PBO has been critical in the past of Ottawa’s overly optimistic projections on the fiscal balance, but now seems to be on the same page with only minor differences.

As well, it says the federal government will eliminate its underlying structural deficit as early as next year, with only the slack in the economy keeping Ottawa in deficit a few years longer.

“The projected improvement in the government’s budgetary balance over the medium term primarily reflects its policy actions to reduce and restrain direct program expenses and is therefore structural in nature,” the report explains.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Alberta’s chief medical officer of health, Dr. Deena Hinshaw, confirmed eight additional virus-deaths Monday afternoon including one in central zone. (Photo by Chris Schwarz/Government of Alberta)
New record: Red Deer at 236 active COVID cases

One more death in central zone reported

The City of Red Deer is still repaying two loans for the Sorensen Station parkade, which are contributing to a deficit in the parking revenue fund. (Advocate staff)
Dropping parking revenues in Red Deer are creating a deficit

Loan repayments for the cost of the parkade are straining reserves

Red Deer firefighters look for coloured tags on downtown fire hydrants to determine water pressure levels before connecting their hoses to fight blazes, such as this fire at a low-income housing complex last summer. (Advocate file photo.)
Tagged fire hydrants are some of the City of Red Deer’s new innovations

New ideas are being generated to improve services or save money: general-manager

RCMP. (Phil McLachlan - Black Press Media)
‘Fake’ police officers demand money, Red Deer RCMP warn of scam

Red Deer RCMP are warning the public of a concerning incident where… Continue reading

The sit-down area of Red Deer's Tim Hortons at 3020 22nd St. was closed to the public on Monday because of an "evolving health situation." The drive-through was open and remained busy.
Photo by PAUL COWLEY/Advocate staff
Red Deer Tim Hortons restaurant dining room closed due to “evolving health situation”

Drive-through at Tim Hortons in southeast Red Deer remained open

Idyllic winter scenes are part of the atmosphere of the holiday season, and are depicted in many seasonal movies. How much do you know about holiday movies? Put your knowledge to the test. (Pixabay.com)
QUIZ: Test your knowledge of holiday movies and television specials

The festive season is a time for relaxing and enjoying some seasonal favourites

Vancouver Whitecaps forward Fredy Montero celebrates after scoring a goal against the Los Angeles Galaxy during the second half of an MLS soccer match in Portland, Ore., Sunday, Nov. 8, 2020. The Vancouver Whitecaps are hanging on to several of their young players and continuing contract talks with two veterans, including Montero. THE CANADIAN PRESS/AP-Steve Dipaola
Whitecaps exercise options on seven players, ‘continuing discussions’ with Montero

Whitecaps exercise options on seven players, ‘continuing discussions’ with Montero

Toronto FC forward Pablo Piatti (7) cuts past Vancouver Whitecaps defender Ali Adnan (53) during first half MLS Canadian Championship soccer action in Toronto on Friday, August 21, 2020. Barring a new agreement, Toronto FC is parting ways with designated player Pablo Piatti. THE CANADIAN PRESS/Nathan Denette
Toronto FC looks for new designated player, opts not to pick up Piatti option

Toronto FC looks for new designated player, opts not to pick up Piatti option

Hamilton Forge FC players celebrate their win over CD Olimpia's during Scotiabank CONCACAF League 2019 action in Hamilton, Ont., Thursday, Aug. 22, 2019. After a season that has taken it from Hamilton to Charlottetown, El Salvador and Panama, Forge FC hopes the Dominican Republic is the last stop on the way to the Scotiabank CONCACAF Champions League. THE CANADIAN PRESS/Peter Power
Forge FC just one win away from booking ticket to CONCACAF Champions League

Forge FC just one win away from booking ticket to CONCACAF Champions League

A police officer patrols near the Olympic Symbol being transported on a barge in the Odaiba section Tuesday, Dec. 1, 2020, in Tokyo. The five Olympic rings are back in Tokyo Bay. They were removed for maintenance four months ago shortly after the Tokyo Olympics were postponed until next year because of the COVID-19 pandemic. (AP Photo/Eugene Hoshiko)
Olympic rings back in Tokyo Bay; a sign of hope in pandemic

Olympic rings back in Tokyo Bay; a sign of hope in pandemic

Ottawa Redblacks player Brad Sinopoli speaks to reporters as the team clears out of the locker room, in Ottawa on Tuesday, Nov. 27, 2018. Sinopoli fully understands the challenge Kendall Hinton faced Sunday with the Denver Broncos. The Broncos activated Hinton, a receiver, from the practice roster to become the starting quarterback in Sunday's 31-3 loss to the New Orleans Saints. THE CANADIAN PRESS/Justin Tang
Former quarterback Brad Sinopoli can appreciate challenges Hinton faced with Broncos

Former quarterback Brad Sinopoli can appreciate challenges Hinton faced with Broncos

Hamilton Forge FC players Giuliano Frano (8) and David Edgar (30) celebrate their team's win over CD Olimpia's during Scotiabank CONCACAF League 2019 action in Hamilton, Ontario on Thursday, August 22, 2019. Edgar, who announced today he is retiring at the end of the year. THE CANADIAN PRESS/Peter Power
Veteran Canadian centre back David Edgar to retire at end of the year

Veteran Canadian centre back David Edgar to retire at end of the year

Sanctuary volunteer Angie Birch greets Wolfdog Rue as she goes through her daily chores at the Yamnuska Wolfdog Sanctuary, Cochrane Alberta on Monday, Nov. 23, 2020. THE CANADIAN PRESS/Dave Chidley
‘My heartdog’: Misunderstood wolfdogs get permanent home at sanctuary near Calgary

‘My heartdog’: Misunderstood wolfdogs get permanent home at sanctuary near Calgary

Alberta Premier Jason Kenney and Quebec Premier Francois Legault leave a news conference in Ottawa on Friday, Sept. 18, 2020. Kenney says Alberta’s largest hospitals are at 91 per cent capacity due to COVID-19 cases and widespread cancellation of more non-urgent surgeries may be necessary. THE CANADIAN PRESS/Sean Kilpatrick
Alberta premier says hospitals stressed by COVID-19, more surgeries may be cancelled

Alberta premier says hospitals stressed by COVID-19, more surgeries may be cancelled

Most Read