OTTAWA — Whichever party winds up governing in Ottawa for the remainder of 2011 will still find something to like about Jim Flaherty’s likely DOA budget.
With the opposition parties all vowing to defeat Flaherty’s sixth budget and trigger an election, the likelihood is that none of the measures introduced in Parliament on Tuesday afternoon will see the light of day.
What survives, however, is the bottom line — the federal government of whatever stripe will have more money to spend or to squirrel away for a rainy day than was the case last year, or even a few months ago.
The finance minister mainly chose the latter course Tuesday — strewing a light sprinkle of new programs worth a mere $2.3 billion — but another finance minister and prime minister have the flexibility to take another direction.
The minister all but said as much at a news conference delivered under media lock-up just three hours before he knew the opposition reaction.
With a new review of government spending expected to find $4 billion in savings, the minister said he may be able to balance the budget in 2014-15, a year before his official goal, or have cash for other priorities.
“That could happen,” he said. “(The review) will give us room to pay down public debt and ... it will give us an opportunity for more tax reductions. That’s where the flexibility can come from going forward.”
The latest accounting from the Finance Department shows that the fiscal cupboard is not nearly as bare as was the case a year ago, or possibly not even as Flaherty maintains now.
The economy is giving the government breathing room it hasn’t enjoyed since 2008, even though Flaherty takes a super-cautious approach in his projections.
The government is now expecting to collect $19.1 billion more in revenues over the next five years than it thought was coming in as recently as October. And that’s not counting $7.5 billion set aside for prudence.
The government’s rosier assumptions stem from the fact that nominal growth, which includes inflation and price effects from higher commodity-export income, expanded by 6.2 per cent last year and is projected to increase by 5.8 per cent this year. Both are significantly higher than last budget’s projections, or those of October’s update.
The stronger growth has already enabled Ottawa to shrink this year’s deficit to $40.4 billion from a previously projected $45.4 billion and many think it will be lower still.
“That better starting point gave them the manoeuvring room to introduce the new measures,” said Bank of Montreal deputy chief economist Douglas Porter.
“If anything, despite succumbing to the temptation to spend the windfall provided by stronger economic and revenue growth, a budget surplus appears well on track by fiscal year 2015-16, if not a year sooner.”
Flaherty still believes the cautious approach is best, as do many private sector economists.
So cautious, that following this year, Ottawa is forecasting slower nominal gross domestic product growth four years running than it did last March.
The U.S. recovery could vanish as soon as Washington stops pumping money into it; Europe is just pushing its debt crisis down the road, not solving it; and there remains a crisis in the Middle East and destruction in Japan.
“Fundamentally we stay on track, we make sure we get back to a balanced budget to protect our country,” the minister told reporters. “We want to be in good shape when the next crisis comes, just like we were in good shape when the last crisis came.”
The budget document warns that any hiccup in economic performance can throw the numbers out of whack.
As the budget shows, Canada may never recover the $100 billion in lost output from the recession. Analyst projections show that five years out, the economy will still be $105 billion smaller than it would have been had the slump not occurred.
Of course, the opposite is equally true. A bigger economic bounce pays dividends year after year.
And economic growth, especially nominal gross domestic product that directly impacts government revenues, could also be higher. Ottawa’s estimates are still low by historic standards.