The Conservative government appears to be getting close to posting a surplus in the current fiscal year as a new report shows federal revenue exceeded expenses by $2.4-billion in December.
The monthly fiscal monitor report produced by Finance Canada shows that over the first nine months of the current fiscal year, the federal deficit stood at $902-million, down dramatically from $12.2-billion during the same period one year earlier.
Monthly deficit and surplus figures can be volatile, making it unclear how federal finances will play out over the final three months of the fiscal year that ends March 31.
Toronto-Dominion Bank senior economist Randall Bartlett said federal finances "looked very healthy" in the first three quarters of 2014-15.
"This puts the shortfall in the current fiscal year on track to come in better than the $2.9 billion deficit projected in the Fall Update," he said in a research note. "What has yet to be seen is how big a drag falling oil prices will be on revenues in final fiscal quarter of 2014-15 and beyond, when the negative impact on nominal GDP – the broadest measure of the tax base – is expected to be particularly vivid."
The figures suggest the possibility that the Conservative government could post a surplus in the current fiscal year of 2014-15.
That would be one year ahead of their current target of returning to balance in 2015-16. The Conservatives had originally promised in their 2011 election platform that 2014-15 would be the year the government would eliminate the deficit but later pushed back that goal by one year.
Federal budgets are normally released in February or March ahead of the fiscal year that starts April 1. However Finance Minister Joe Oliver has said he won't release the 2015 budget – his first as finance minister – until at least April.
The minister has said the government is waiting until a clearer picture emerges of the impact of lower oil prices, which have tumbled by more than half over the past year. The prices have shown no sign of a rebound since Mr. Oliver announced the budget would be delayed.
Mr. Oliver's Nov. 12 fiscal update forecast a deficit of $2.9-billion in 2014-15 and a surplus of $1.9-billion in 2015-16, based on an assumption of oil prices for North American crude holding at around $81 (U.S.) per barrel over the next five years. The government then announced several infrastructure projects that brought the estimated size of the surplus down to $1.6-billion.
The price of oil was trading below $50 Friday. Lower oil prices have a dramatic impact on oil-producing provinces that collect royalties, such as Alberta, Saskatchewan and Newfoundland and Labrador. The impact on Ottawa is more indirect. Lower oil prices are expected to hurt economic growth overall, leading to lower corporate and personal tax revenue. Lower oil prices also impact Ottawa by keeping the dollar and inflation low, which also hurts federal revenues.
The government has not provided an update as to the fiscal impact of lower oil prices on Ottawa's bottom line. However Conservative MPs continue to state in the House of Commons that the budget will be balanced.
Friday's fiscal monitor report – as well as the upcoming 2015 budget – only provides forecasts for the bottom line. The official figures are reported months after the end of the fiscal year in a document called the Public Accounts.
It is not clear whether the Public Accounts for the current 2014-15 fiscal year will be released before the federal election scheduled for Oct. 19 of this year. As for whether the government achieves its goal of posting a surplus in 2015-16, that won't be known for sure until about a year after the election.