Joe Oliver defends choice to use outdated growth projections

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Conservative candidate and Finance Minister Joe Oliver is defending his party's decision to build its platform on his April budget, even though its projections for growth are now considered out of date.

When Mr. Oliver released the government's pre-election budget on April 21, it assumed the Canadian economy would grow by 2 per cent this year.

Yet this week, the International Monetary Fund joined many private-sector economists in forecasting growth of just 1 per cent this year, a development that could reduce federal revenues by about $4-billion. Statistics Canada also reported Friday that Canada's unemployment rate rose to 7.1 per cent in September. The budget estimated the unemployment rate for 2015 would average 6.7 per cent.

The Conservative platform released Friday forecasts small surpluses of $1.7-billion in 2016-17, $1.4-billion in 2017-18, $947.8-million in 2018-19 and $2.4-billion in 2019-20. The platform contained limited new spending that starts at $590-million next year and rises to $3-billion a year over and above what had already been announced in the budget.

The platform's bottom line is silent on the forecast for the current 2015-16 fiscal year, which would be affected if growth does come in at less than half the budget forecast.

While economists say it is of no real significance if Ottawa's finances are in a small surplus or small deficit, the issue of whether to run surpluses is a key point of political debate in the election campaign.

In an interview, Mr. Oliver defended his party's decision to rely on the budget. He said budget numbers are based on an average forecast from private-sector economists and the government does not normally adjust those figures until the fall fiscal update.

Mr. Oliver's own budget states that as a rough guide, a 1-per-cent reduction in GDP would trim at least $4-billion from the bottom line. But the minister said there are other factors that would help the balance sheet. Specifically, he notes last year's bottom line had been forecasted as a deficit and turned out to be a surplus, while the first four months of the current fiscal year show a $5.2-billion surplus, which is above the $1.4-billion surplus that had been forecasted in the budget for this year.

"We have a rough idea of [the negative fiscal impact of lower growth], but what I'm saying is there are a number of other factors that would be driving the surplus up," he said.

Mr. Oliver also said that while Friday's numbers show a higher unemployment rate, he noted that that means more people are looking for work. He also said that the 12,100 jobs created in September beat private-sector expectations.

Liberal candidate John McCallum said the Conservatives should not be using the budget numbers for the platform.

"Everybody knows that since the time of the budget, the economy has deteriorated," he said. "And yet they continue to stick to these out-of-date growth forecasts … it certainly inflates their surplus projections by billions of dollars and it's entirely misleading."

The Liberal platform, which forecasts three years of deficits before returning to surplus, includes a reduction in the budget's expected revenue forecast due to a reduction in economic growth. However, the Liberals, unlike the Conservatives and NDP, do not include contingencies in their numbers for the first three years that would cover unforeseen events.

Along with the Tories, the NDP released its full platform Friday and is also relying on the April budget numbers in order to forecast surpluses of at least $3-billion a year including contingencies.

The NDP responded to criticism over the use of budget numbers by including a section that says it would still be able to post surpluses – albeit smaller ones – if it used more recent and less optimistic forecasts for economic growth released in July by the Bank of Canada and the Parliamentary Budget Officer.

"The Prime Minister's staked a lot of credibility on this and I think it's incumbent upon the Conservatives to actually be able to demonstrate, beyond a statement of 'trust me,' that they will be able to get to a balance," said NDP candidate Andrew Thomson.

Friday's job numbers marked the last release of major economic data before the Oct. 19 election.

The jobs report amounted to a mixed bag of data that offered little for the Conservative government to champion, nor did it give the opposition parties a narrative of doom and gloom to support their call for change.

None of the three main party leaders jumped on the specifics of Friday's jobs report, though all three continued to promote their campaign plans as the best answer for boosting employment.