Fiscal update

In a minority government, the budget doubles as a confidence bill, one that can set the ruling party up for defeat. In 1979, Joe Clark's Tory government fell on a non-confidence vote on his budget. The key to that vote was the thorny issue of a gas-excise tax.

The next fiscal update, delivered Tuesday, Nov. 16, by Finance Minister Ralph Goodale, will set a framework for the next budget, which is expected in February or March. It will be presented to the Commons finance committee and in it, the minister will lay out revenue and spending projections for the next five years.

Projections are crucial as they set spending and revenue priorities. In other words, how much money the government will bring in, and how much the government will have to spend.

Paul Martin and his Liberals brought in an era of surpluses and "fiscal prudence" that won't allow the government to go into deficit. Such a guiding principle puts a few limitations to ambitious spending plans.

But will a minority government be held accountable to its platform promises? Will the Conservatives be able to pressure the government to bring in tax cuts? Can the NDP help force child care funds?

Canada's financial situation

The Bank of Canada has raised it outlook for the economy, saying it expects growth this year of 2.9 per cent. In 2005, the bank expects growth at a similar level, down from earlier forecasts which pegged the annual expansion closer to 3.5 per cent at an annual rate. By 2006, the central bank expects growth to advance at an annual rate of about 3.2 per cent . Interest rates are expected to continue to rise over the next 12 to 18 months.

Dollar

The dollar recently reached a fresh 12-year high, hitting close to the 84 cent mark. The dollar hasn't topped 83 cents since September, 1992. It was trading in the low 60-cent range as little as two years ago. The dollar's recent move put the loonie squarely at the Organization for Economic Co-operation and Development's "purchasing power parity" level of 83 cents, suggesting further gains could make the value of the dollar an even more crucial issue in terms of this country's global competitiveness.

Surpluses and promises

The government has forecast a $9.1-billion surplus for 2003-2004, the seventh straight surplus recorded since 1997. Following table lists the deficits or surpluses reported since 1991.

Money to spend?

Since the election, the government has struck a few big deals -- one on health care and the other in equalization. In a recent report, the Toronto-Dominion bank looked at the revised surplus figures and estimated that Ottawa has about $20.3-billion left to spend over six years on other platform commitments -- including families, cities and defence. After this, the bank says the government could have an additional $21.8-billion in extra surplus to spend, assuming the government can find savings in its economic review and drops its $3-billion economic prudence.