Finance Minister Jim Flaherty has invited private-sector economists for a face-to-face meeting on Oct. 28, a timeline that suggests the government’s fall economic update would be delivered in the second week of November.
Wednesday’s Throne Speech promised Ottawa would climb out of deficit by 2015 and that new balanced budget legislation would keep federal finances in the black, with exceptions for recessions.
The fall economic update will provide the latest glimpse at how Ottawa is progressing toward that target. It will also show what kind of surpluses could be expected in the following years. Those numbers will be watched closely by all political parties as they start thinking about election platforms for the 2015 campaign.
With the shortened fall sitting due to prorogation, the week of Nov. 11 is the only break week. In recent years, Mr. Flaherty has delivered his economic update during a break week at a venue away from Ottawa.
The government’s budget numbers are based on an average forecast private-sector economists provided in March. The November update would refresh those estimates. Economists have been downgrading their growth forecasts slightly in the months since, but they still generally assume Mr. Flaherty should be able to balance the books by 2015, provided there is no major financial shock.
The Throne Speech hinted at action on several economic fronts, from balanced-budget legislation, to tighter public-service spending and broad changes to the training grants and the Temporary Foreign Worker Program.
The government provided few additional details Thursday, as the Conservative message focused on Prime Minister Stephen Harper’s trip to Brussels this week to sign an agreement-in-principle with the European Union on trade.
Treasury Board President Tony Clement said he’d be looking to find more savings from the public service and details on the balanced-budget bill would come later.
“I think when you look around the world, countries that got into trouble fiscally had habits of not balancing their budget even in the good times. I don’t think that’s an example that Canada wishes to emulate. And so we will have further details in the future,” he said.
Whether balanced-budget laws actually produce balanced budgets, however, is an open question.
“I’m not a big fan of balanced-budget legislation,” said Craig Wright, RBC chief economist. Mr. Wright said such laws can force governments to make decisions during recessions – such as tax hikes or spending cuts – that he said “kicks the economy when it is already down.”
University of Manitoba economics professor Wayne Simpson – who has studied provincial balanced-budget laws – agrees. He notes that a common feature is a “rainy day” fund to store cash to cover potential deficits and he questions whether that is the best use of government funds.
“I think frankly they’re not very good policy,” he said. “I’m not sure that’s the best way to organize your finances, whether it’s a household or a government, to save money for a rainy day as opposed to saying ‘I know I can borrow money if I have to.’ ”
Prof. Simpson said reducing debt as a percentage of gross domestic product – which the Throne Speech commits to doing – is a more important measure of healthy finances.