The federal government posted a $3.2-billion deficit in August even as it is largely succeeding at holding the line on government spending.
The latest monthly tracking figures from Finance Canada show that over the first five months of the fiscal year that began April 1, Ottawa's deficit now stands at $6.2-billion.
The deficit for August 2012 is slightly higher than the $3.1-billion deficit posted in August 2011. The five month deficit of $6.2-billion so far this year is better than the $9-billion deficit posted during the same five month period the year before.
Taking a deeper look at spending trends over the first five months of the year, it's clear Ottawa's finances are benefiting from low interest rates. Spending on public debt charges is 6.7 per cent less than the same period the year before. That has helped the federal government keep total expenses at a 0.5-per-cent increase, even as it follows through with promises to keep the health transfer to the provinces growing at 6 per cent and the social transfer growing at 3 per cent. (Last year Ottawa announced that starting in 2017-18, growth in the health transfer will be tied to nominal GDP, which is likely to be less than 6 per cent.)
On the revenue side, total revenues are up 3.4 per cent over the first five months of the year. Personal income tax revenues are up 3.8 per cent, corporate tax revenues are up 1.3 per cent and revenues from the Goods and Services Tax are up 5.9 per cent. Revenue from Employment Insurance premiums are up 7.8 per cent.
Earlier this year the government announced that the deficit for the 2011-12 fiscal year was $26.2-billion, or $1.4-billion larger than forecast in the March 2012 budget. That budget also forecasted that Ottawa will return to surplus in 2015-16.
Finance Minister Jim Flaherty recently stated that his fall economic update may have to make some downward revisions to the government's expectations for economic growth, but that its overall deficit plans remain on track.