Revenues are up and spending is down as the uncertain Canadian economy hasn’t stopped Ottawa’s bottom line from improving over last year.
On Friday, Finance Canada released its fiscal update for October. The report shows the federal government posted a $2.2-billion deficit that month, which is down from a deficit of $4.1-billion in October 2010.
Over the first seven months of the fiscal year that started April 1, the federal deficit is $15.4-billion, down from $21.5-billion during the same period a year earlier.
Should monthly deficits continue at that pace over the final five months, Ottawa would be on track to beat its estimate for this year’s budget.
In his Nov. 8 fiscal update, Finance Minister Jim Flaherty had revised his estimate for this year’s budget to $31-billion, from the $29.6-billion deficit estimated in the June 2011 budget.
Still, Statistics Canada data for Canadian economic growth points to a slowing economy in the fourth quarter and economists are projecting very low growth for 2012, which will ultimately impact government revenues.
Looking at the details of Friday’s Finance Canada report on government revenues, personal income tax revenues are up 7.1 per cent over the first seven months of this year and corporate tax revenue climbed 11.7 per cent. Another source of new revenue is coming from higher Employment Insurance premiums, which has boosted the government’s stream of premium revenue by $500-million, or 4.8 per cent.
On the expense side, spending on government programs is down by $1-billion - or 0.8 per cent - compared to the same seven month period in 2010. That’s in spite of the fact that Ottawa is already starting to pay more for elderly benefits as the baby boomer generation starts to reach retirement age.
Elderly benefits increased by $1.3-billion - or 6.1 per cent - due to growth in the elderly population as well as the introduction of a top-up benefit to the Guaranteed Income Supplement for low-income seniors.