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Finance Minister Joe Oliver defended the government’s major retroactive tax cuts Friday in Toronto for families that will reduce federal revenue by $27-billion over six years.

Darren Calabrese/THE CANADIAN PRESS

Private-sector economists who will supply key forecasts for Finance Minister Joe Oliver's upcoming budget say a delayed delivery makes sense, but there are few signs the economic picture will be much better three months from now.

The delay also has some observers questioning whether the move is an acknowledgment that the Conservative government's original plans no longer hold up.

At this point in January, most of the behind-the-scenes work on federal budgets tends to be complete as the government prepares for a February or March budget. Mr. Oliver's announcement Thursday that the budget won't come until at least April buys the government more time to assess the impact of lower oil prices on federal revenue.

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The delay came just one day after he said that, even after taking falling oil prices into account, the government would post a $1.6-billion surplus in 2015-16.

Bank of Montreal chief economist Doug Porter said the government has been "whistling past the graveyard of high oil prices" for weeks but delaying the budget suggests a change in tone.

"Budget makers across the country are grappling with a rapidly changing reality and I suspect that, specific to Ottawa, it has moved so far, so fast that it actually has altered their key underlying assumptions behind the budget," he said. "I think they probably have to reassess their strategy at this point."

Mr. Porter estimates that Ottawa could still post a surplus in 2015-16 by the slimmest of margins, provided it makes no new spending announcements and uses up nearly all of its $3-billion contingency reserve.

Economists said Friday that waiting to see how recent market turmoil plays out is probably a smart move, but there is no guarantee that the situation will be much different three months from now.

"They're looking to see if stability emerges – or some type of stability," said Mary Webb, Scotiabank's director of economic and fiscal policy. "It may not emerge. And I believe we're all worried about that outcome."

The International Energy Agency said in a report Friday that a recovery in prices "may not be imminent," although it added there are signs that the downward trend will end in the second half of 2015.

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Ms. Webb and Mr. Porter are among the 15 private-sector economists who contribute to an average forecast for the economy that Finance Canada uses to estimate revenue over the next five years.

The price of oil has dropped by more than half since June. The change will have the most dramatic impact on revenues in provinces that collect oil royalties, including Alberta, Saskatchewan and Newfoundland and Labrador.

However, Ottawa will also take a hit in tax revenue because of lower-than-expected growth and inflation.

The changing landscape is leading some to second-guess Prime Minister Stephen Harper's decision to announce major retroactive tax cuts for families in October – outside of the budget process – that will reduce federal revenue by $27-billion over six years.

Mr. Oliver defended the tax cuts Friday in Toronto.

"A surplus is not there to look at. A surplus is there to provide benefits to Canadians," said Mr. Oliver, who declined to provide more clarity as to when the budget will be delivered.

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David McLaughlin, a former chief of staff to former Conservative finance minister Jim Flaherty, said the fall tax cuts seemed like "pretty good strategy" at the time. The move left very little future revenue for opposition parties to promise new spending in an election without also pledging to reverse tax cuts for families.

"This is unsettling territory for the Conservatives. The clock is ticking in terms of the election. They thought they were in good enough shape to announce this stuff early," he said. "They could have held it off and done it in the budget when they really knew the numbers. This [delay] may be an attempt to get more political control of the situation."

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