The political war-of-words around the national economy took another turn on Sunday’s political talk shows as the federal finance minister warned Conservatives to cease claims of a looming recession.
Finance Minister Bill Morneau also suggested in separate broadcast interviews that the country’s economic track will have a bearing on how the Liberals steer their government’s budget in the coming years.
On CTV’s Question Period, Morneau warned his Conservative critics to avoid the “irresponsible” claims when private sector economists project growth, which the fiscal update estimated at 1.7 per cent this year and 1.6 per cent in 2020.
The projections would make Canada’s the second-fastest-growing economy among G7 countries, behind only the United States.
“I think it’s a little bit irresponsible of the Conservatives to be making people more anxious,” Morneau said in the CTV interview.
Conservatives claim the conditions are ripe for a “made-in-Canada” recession, fuelled by the Liberals’ spending policies, as the party’s finance critic, Pierre Poilievre, claimed last Monday in the wake of the fiscal update.
“I’m not saying there is (a recession), but if we head to a recession, it will be a made-in-Canada recession,” Poilievre told reporters at the time.
The technical definition of a recession is two consecutive quarters of economic contraction, but the scope of the declines makes a difference between adorning the label to the downturn of 2008 or the split to do so for the two quarters of declines measured in 2015.
On Sunday, Morneau said the government wants to ensure continued growth, particularly after disappointing jobs numbers from November revealed the economy shed some 71,000 jobs.
“We need to play our hand cautiously, but I see the economy as strong and I see it as growing,” Morneau said on Question Period.
Morneau’s fiscal updates released Monday showed the Liberals’ projected deficit of $19.8 billion for this fiscal year will now be $26.6 billion, and next year it will be $28.1 billion before accounting for the Liberals’ election promises.
The Finance Department said the deeper deficit is largely driven by changes to how employee pensions and benefits are calculated – a hit that grows when interest rates are low, but could drop sharply when interest rates rise.
The Liberals’ election platform projected four years of deficits of more than $20 billion, including almost $27.4 billion in 2020-21.
Experts and the parliamentary budget officer suggested the government’s fiscal wiggle room had suddenly narrowed considerably, particularly if the economy slows down.
The budget officer suggested in its review of the fiscal update that the Liberals have run deficits between $18 billion and $28 billion, which may act as an “implicit fiscal anchor” for Morneau. The finance minister didn’t say how deep a federal deficit he would be comfortable seeing.
“The hypotheticals about what might or might not happen in the future are very dependent on where we go in the economy,” Morneau said on Global’s The West Block.
“We expect strong growth that will allow us to continue to make these investments.”
Morneau said in the interview that the Liberals planned to focus on maintaining the country’s triple-A credit rating, keeping that “fiscal firepower” as Trudeau has asked and making sure the national debt declines as a percentage of the overall economy.
He also said the Liberals would continue spending on things that matter to Canadians.
Our Morning Update and Evening Update newsletters are written by Globe editors, giving you a concise summary of the day’s most important headlines. Sign up today.