Federal Conservatives are promising to deliver a balanced budget on April 21 against the backdrop of a slowing economy and sluggish job growth brought on by the dramatic drop in the price of oil.
Finance Minister Joe Oliver ended weeks of speculation on Thursday by confirming the date of the budget, which will be several weeks later than usual. Mr. Oliver announced in January that he was waiting until at least April because of the changing economic landscape.
"We needed to assess the implications of the dramatic fall in oil prices and its instability on the Canadian economy and on our fiscal framework," Mr. Oliver said Thursday. "We now have the information we need to make informed decisions."
Much has changed on the federal financial landscape since Mr. Oliver's fall update on Nov. 12. Just weeks earlier, Prime Minister Stephen Harper had announced family-focused tax cuts worth about $5-billion a year, a move that used up a large percentage of future expected surpluses.
At that time, Ottawa was expecting GDP growth of 2.6 per cent in 2015 and 2.4 per cent in 2016. Now, markets are expecting growth of just 2 per cent this year and 2.2 per cent next year. Inflation is also coming in lower than expected, which adds to the expected hit on federal revenues.
Mr. Oliver's department is planning a $7.5-million ad campaign to promote the 2015 budget. A Finance official told The Globe and Mail the campaign will highlight policies such as doubling the Children's Fitness Tax Credit, the new Family Tax Cut that allows parents to split their income for tax purposes, and the enhancement of the Universal Child Care Benefit, which delivers monthly payments to parents.
All of those measures were announced in October. The fact that they will be the focus of the budget ad campaign suggests little room is left for major new spending.
In November, Ottawa was forecasting a $1.9-billion surplus for 2015-16, but economists say slower-than-expected growth has likely erased most of that.
This means any new spending promises will likely be focused on future years, essentially making the budget a form of Conservative campaign platform for the Oct. 19 federal election.
CIBC chief economist Avery Shenfeld says the government has few opportunities to announce "shiny baubles" that take effect right away with the 2015 budget.
"I think it's [a budget] that has little in the way of news for 2015-16 because the headlines have already been stolen, but perhaps a headline or two for items that kick in beyond this year," he said.
One new initiative could be an increase in infrastructure spending. Conservative officials responsible for the budget have had several meetings in recent weeks with the Federation of Canadian Municipalities, who want more cash for transit and other infrastructure needs.
Mr. Oliver made his budget date announcement in Toronto at the Canada Goose clothing manufacturing plant.
The minister gave few details on the contents of the budget, other than to say it will not focus on spending cuts and will contain investments for the future.
"We're not looking at a budget that will be cutting. We're looking at a budget that will be providing benefits to Canadians and encouraging more job growth. We do not, however, need the kind of stimulus budget that we had during the great recession because we are not in a recession now, but we are going to continue to make investments in the future," he said.
The Finance Minister also indicated clearly for the first time that the budget assumptions for future revenue will include a figure based on an average forecast of future oil prices provided to Finance Canada by private-sector economists.
Federal budgets are regularly built on an average of private-sector forecasts for economic growth, which include assumptions about the future price of oil. Mr. Oliver departed from that practice with his fall economic update, choosing instead to use the current – or spot – price for oil, which was $81 (U.S.) per barrel for North American crude. Oil has been trading around $50 for most of this year.
A survey of economists by Bloomberg found most expect prices to average $55.30 in 2015 and $70 in 2016.
The Bank of Canada decided in 2014 to use the spot price for its forecasts rather than estimates of the future price.
Bank of Canada Governor Stephen Poloz explained that decision in January, saying it was based on the bank's internal analysis that concluded "it would be more honest" to use a fixed assumption for oil prices.