Ottawa showing progress in drive to eliminate deficit

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.

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

Just Posted

A cross-country skier glides along the banks of the Ottawa River in Ottawa on Thursday, Feb. 25, 2021. Canadians across the country can look forward to a mild spring peppered with the odd winter flashback throughout the first part of the season, according to predictions from one prominent national forecaster. THE CANADIAN PRESS/Sean Kilpatrick
Mild spring with some wintry blasts predicted for most of Canada: Weather Network

March will be dramatically warmer through the prairies

Bharat Masrani, CEO, TD Bank Group speaks at the Economic Club of Canada in Toronto on Wednesday, November 1, 2017. THE CANADIAN PRESS/Nathan Denette
Five things to watch for in the Canadian business world in the coming week

Shares in metals and mining companies have rebounded sharply

A worker carrying a disinfectant sprayer walks past a WestJet Airlines Boeing 737-800 aircraft, after cleaning another plane at Vancouver International Airport, in Richmond, B.C., on Thursday, January 21, 2021. THE CANADIAN PRESS/Darryl Dyck
WestJet to lay off undisclosed number of pilots amid labour negotiations

Layoff notices to go out ahead of the expiration of a memorandum of agreement

A dose of COVID-19 vaccine is prepared at a vaccination clinic in Montreal’s Olympic Stadium on Tuesday, February 23, 2021. THE CANADIAN PRESS/Paul Chiasson
Feds hoping for AstraZeneca shots this week as Pfizer-BioNTech prepare next delivery

Canada has ordered 24 million doses of AstraZeneca vaccine

Free Reformed Church is seen as people attend Sunday Service, in Abbotsford, B.C., Sunday, Feb. 21, 2021. A legal advocacy group challenging British Columbia’s COVID-19 restrictions on worship services and public protests is scheduled to be in court today arguing for the church and others that COVID-19 restrictions violate their charter rights. THE CANADIAN PRESS/Darryl Dyck
Churches in court to challenge British Columbia’s COVID-19 health orders

Calgary-based organization says it represents over a dozen individuals and faith communities in the province

Red Deer science-communicating dogs Bunsen and Beaker helped save a missing pet recently. The two dogs have more than 80,000 followers on Twitter. (Contributed photo)
WATCH: Red Deer science dogs help save lost pet

Red Deer science-communicating dogs Bunsen and Beaker helped rescue a missing pet… Continue reading

Team Canada skip Kerri Einarson makes a shot against Team Alberta as second Shannon Birchard, right, and lead Briane Meilleur sweep in the semi-final at the Scotties Tournament of Hearts in Calgary, Alta., Sunday, Feb. 28, 2021. THE CANADIAN PRESS/Jeff McIntosh
Kerri Einarson wins second straight Canadian women’s curling championship

Einarson and her teammates celebrated Sunday in the silence in an empty arena

Amy Poehler and Tina Fey hosted the Golden Globes on Feb. 28, 2021. (Photo by THE ASSOCIATED PRESS)
With loved ones and pets, Globes winners embrace cozier show

Nicole Kidman and musician-husband Keith Urban got glammed up to sit on their couch

The cast of “Schitt’s Creek” pose for a photo after winning the Award for Best Comedy Series at the Canadian Screen Awards in Toronto on March 31, 2019. THE CANADIAN PRESS/Chris Young
Schitt’s Creek nabs two Golden Globes for its final season

Catherine O’Hara named best television actress in a musical or comedy

Alberta Premier Jason Kenney speaks during a news conference in Edmonton on Feb. 24, 2020. It’s budget day in the province, and Kenney’s United Conservative government is promising more help in the fight against COVID, but more red ink on the bottom line. THE CANADIAN PRESS/Jason Franson
Alberta Premier slams vandalism after slur painted on MLA’s office window

EDMONTON — Alberta Premier Jason Kenney is condemning alleged vandalism at the… Continue reading

Canada Pension Plan Investment Board President and Chief Executive Officer Mark Machin waits to appear at the Standing Committee on Finance on Parliament Hill, in Ottawa on Tuesday, November 1, 2016. Executives who engage in so-called "vaccine tourism" show both an ethical disregard for those less fortunate and a surprising lack of business acumen, experts argue. THE CANADIAN PRESS/Adrian Wyld
Vaccine tourism is both unethical and bad for business, experts say

Executives who engage in so-called “vaccine tourism” show both an ethical disregard… Continue reading

Edmonton Oilers' Jesse Puljujarvi (13) and Toronto Maple Leafs' Justin Holl (3) battle in front as goalie Jack Campbell (36) makes the save during second period NHL action in Edmonton on Saturday, February 27, 2021.THE CANADIAN PRESS/Jason Franson
No Matthews, no problem: Minus NHL goal leader, Maple Leafs blank Oilers 4-0

Leafs 4 Oilers 0 EDMONTON — The Maple Leafs knew even with… Continue reading

Leader of the Government in the House of Commons Pablo Rodriguez rises during Question Period in the House of Commons on Parliament Hill in Ottawa, Friday, Nov. 20, 2020. THE CANADIAN PRESS/Justin Tang
Gummed-up bills in House of Commons: harbinger of a federal election?

OTTAWA — All federal party leaders maintain they don’t want an election… Continue reading

The Pornhub website is shown on a computer screen in Toronto on Wednesday, Dec. 16, 2020. THE CANADIAN PRESS
Pornhub policies reveal legal gaps and lack of enforcement around exploitive videos

OTTAWA — Serena Fleites was in seventh grade when a sexually explicit… Continue reading

Most Read