Ottawa starts year in better shape narrowing deficit to $1.15B in April-May

The federal government continues to show progress in its drive to eliminate the deficit by next year, the latest accounting from the Finance Department indicates.

OTTAWA — The federal government continues to show progress in its drive to eliminate the deficit by next year, the latest accounting from the Finance Department indicates.

In the first report on its financial position for the new 2014-15 fiscal year, the department said it posted a combined $1.15-billion deficit for April and May, the first two months of the fiscal year. That compared with a $2.7-billion shortfall last year during the same period.

The improvement was mostly on the revenue side as the government took in $1.6 billion, or 3.8 per cent, more than in the April-May months last year, while program expenses increased only $216 million, or 0.6 per cent. Debt charges fell by $167 million.

By individual months, Ottawa said April produced a $1.4 billion deficit, while May brought a tiny surplus of $267 million.

The April-May numbers slightly undershoot the pace required to achieve the budget goal of a $2.9-billion deficit in 2014-15, especially since the government is counting on making huge strides on the deficit during this fiscal period.

The budget estimate for last year’s deficit was $16.6 billion, meaning that Ottawa will need to shave about $13.7 billion from that number in one year to meet the target.

Analysts caution, however, that the monthly tracking of the fiscal position can be “lumpy.” Individual reports can show large swings that are not indicative of the underlying state of the country’s finances.

“It’s a pretty respectable start, although it is early days yet,” said Mary Webb, a senior economist with Scotiabank who specializes on fiscal policy.

“The part I worry about is on the revenue side because employment has not been very strong and for the government personal income tax is very important.”

Employment growth has been weak in Canada the past 12 months with only 72,000 net new jobs created. However, the government has benefited from strong oil prices and higher inflation, which tends to increase tax revenues.

Webb said attaining a balanced budget by 2015 is “important politically” for the Harper government, but not from a market perspective.

“If Ottawa was able to reduce the deficit to below $5 billion, it will look very good and the deficit will be a fraction of GDP (gross domestic product),” she pointed out.

Politically, however, the Conservatives need to balance the budget in order to fulfil a 2011 election promise to cut taxes for families through income splitting once the deficit is eliminated.

Ottawa has a few aces in the sleeve toward achieving the target, even if economic and employment growth underperform expectations.

Although the budget projected a $16.6-billion deficit for last year, the preliminary numbers point to a shortfall about $4 billion below that number. As well, Ottawa has built in a $3-billion contingency buffer it may not need. Finally, the government can sell assets, such as millions of General Motors shares, to reduce the deficit.

Still, the expectation is that in the coming months Ottawa’s books will be showing fewer and smaller monthly shortfalls, turning to surpluses by the end of the year.

Just Posted

Rural transit service rolled out

2A South Regional Transit will link Innisfail and Penhold with Red Deer

Some Red Deer waste collection schedules change due to holiday season

Tuesday collections will be moved for two weeks

Red Deer ‘champion’ helps hospital by sharing ongoing petition

It’s been about three years since many physicians at Red Deer Regional… Continue reading

Red Deer Airport’s prospects are looking up for 2019

Ultra-low-cost passenger service is on the horizon

Funding down for Red Deer Christmas charities

Food hampers and toys for children going out to those in need

Alberta’s Sundial starts shipping to AGLC this week

Sundial’s Rocky View facility has received the green light from Health Canada… Continue reading

Penny Marshall dead at 75, best known as TV’s Laverne and director of ‘Big,’ ‘A League of Their Own’

Bronx-born Penny Marshall, who found ’70s sitcom success on “Laverne and Shirley”… Continue reading

Chabot scores overtime winner to lift Senators over Predators 4-3

OTTAWA — Thomas Chabot saw an opening and he took it. And… Continue reading

Canadian Marielle Thompson earns World Cup ski cross bronze in season opener

AROSA, Switzerland — Canada’s Marielle Thompson captured bronze at the opening World… Continue reading

Canada doesn’t make Oscars short list for best foreign language film

LOS ANGELES — Canada is no longer in the running for best… Continue reading

Warrant issued for arrest of ‘Schwimmer lookalike’ suspect

LONDON — A British judge has issued an arrest warrant for an… Continue reading

Moneywise: Canadian workers unhappy with pay, want pension plans

Many working Canadians are feeling underpaid and are so worried about their… Continue reading

Brazil police say faith healer has turned himself in

RIO DE JANEIRO — A celebrity faith healer accused of sexually abusing… Continue reading

B.C. hockey coach creates ‘gear library’ to remove cost barrier of sport

VANCOUVER — Nicola Froese says she has always loved playing sports, but… Continue reading

Most Read