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Deputy Prime Minister and Finance Minister Chrystia Freeland rises during Question Period, Sept. 28, 2022 in Ottawa.Adrian Wyld/The Canadian Press

Finance Minister Chrystia Freeland will release a fall economic update on Thursday, Nov. 3, which she has signalled will emphasize caution and fiscal discipline as Canada faces the possibility that steep interest-rate hikes will push the economy into recession.

Ms. Freeland has been touring the country, delivering speeches aimed at setting expectations for the fiscal plan. While Ottawa spent heavily on direct financial aid for individuals and businesses during the pandemic, she has indicated that cost-of-living supports will have to target those most in need.

“We cannot support every single Canadian in the way we did with the emergency measures we put in place at the height of the pandemic,” she said this month in Windsor, Ont. “We cannot compensate every single Canadian for all of the inflation driven by a global pandemic and by Putin’s invasion of Ukraine. To do so would only make inflation worse and force the Bank of Canada to raise interest rates even higher.”

In Question Period Friday, Conservative MPs continued their criticism of the government’s spending record, claiming that Ottawa’s deficit spending is making inflation worse at a time when visits to food banks are skyrocketing.

“How many Canadians have to lose their homes before they get it and cancel their inflation-causing borrowing?” said Tory MP Scott Aitchison.

Projections from the Parliamentary Budget Officer and private-sector economists suggest the fiscal update will deliver good news about the present while warning of tough times on the horizon.

In the short term, higher inflation provides a major boost to federal revenues. The PBO has said the deficit for the 2022-23 fiscal year is likely on track to be about half the $52.8-billion projected in the April budget.

Over the longer term, though, higher interest rates can be expected to slow economic growth, which economists say will ultimately hurt Ottawa’s bottom line by reducing tax revenues and increasing costs in areas such as employment insurance payments to Canadians who have lost their jobs. And of course higher rates will also mean higher borrowing costs for the federal government. The federal debt reached $1.13-trillion in the 2021-22 fiscal year, almost double pre-pandemic levels.

New figures released Friday in the Finance Department’s monthly Fiscal Monitor report provide further evidence that Ottawa’s fortunes have improved since the April budget. The report shows Ottawa ran a $2.5-billion deficit in August, compared with a $9.8-billion shortfall in August of last year.

Ottawa remains in surplus, however, over the first five months of the fiscal year. From April through August, the government ran a surplus of $3.9-billion, compared with a deficit of $57.2-billion during the same period last year.

The monthly reports provide a sense of the government’s financial trend lines. It is important to note, though, that Ottawa generally posts larger monthly deficits toward the end of the fiscal year.

Another key release of government spending data took place Thursday in the form of the public accounts, which record the official financial numbers of spending and revenue for the 2021-22 fiscal year, which ended March 31.

That report showed the deficit for that year to be $90.2-billion – smaller than the $113.8-billion projected in the April budget and a sharp drop from the $327.7-billion deficit recorded the year before the height of the pandemic.

In terms of potential policy announcements to watch for in the fall fiscal update, Ms. Freeland hinted last week that it could lay out how Ottawa intends to respond to competition issues arising from the U.S. Inflation Reduction Act, a major package of tax reforms and environmental policies approved by Congress.

The April budget also announced two new programs and said further details would be revealed in the fall update after consultations. The Canada Growth Fund is aimed at attracting private investment in projects that contribute to lowering greenhouse gas emissions, and the Canadian Innovation and Investment Agency will encourage more investment in research and development.

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