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Quebec Finance Minister Carlos Leitao, centre, is applauded by members of the government as he stands to present his budget speech, Thursday, March 17, 2016 at the Quebec Legislature.

Jacques Boissinot

Quebec's Liberal government says it has the province's finances under control. Now it has to figure out how to propel economic growth with one of the world's most rapidly aging populations.

Two years after coming to powerin an election that left the separatist Parti Québécois in disarray, Premier Philippe Couillard's government on Thursday tabled its second consecutive balanced budget. While Alberta reels under an oil-prices crash that shows no sign of abating and Ontario will continue to grapple with deficits until next year at least, Quebec is emerging from the other end of a $7.6-billion cost-cutting effort with a spring in its step and plans to give some of the cuts back to voters.

"To use one of the Premier's favourite images, our ship successfully sailed through rough seas and we are now entering calmer waters," Finance Minister Carlos Leitao told the legislature in his budget speech. He said the province must now capitalize on lower oil prices and the dollar's depreciation to tackle structural factors slowing its economic growth to below 2 per cent.

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After reining in program-spending growth to 1.6 per cent for 2014-15 and holding it at that level the year after, Quebec is now in a position to loosen the purse strings a bit this year to a 2.7-per-cent growth rate. As of 2017-2018, program spending will increase at an annual rate of 2.8 per cent, Mr. Leitao said.

All the financial targets presented Thursday provide for a balanced budget for the next five fiscal years, suggesting the government has no intention to return to big spending even in a crisis.

"He's not going to do what other finance ministers have done in the past, that is bring back the big punchbowl," said Sébastien Lavoie, assistant chief economist at Laurentian Bank. "You can't free up money and start providing tax relief or spending for everyone out there. You need to be more surgical about it."

Middle-class families are among those who will get almost immediate relief. The Liberals announced they would cut by half the fee parents pay for a second child receiving subsidized child care. The new fees, which are coming due now at tax time, have become a source of irritation for parents who argue Quebeckers are already among the highest-taxed Canadians.

As expected, Quebec is also putting an early end to the health contribution paid by 4.5 million taxpayers. It will now be phased out over two years ending in December, 2017. And it's introducing a new tax credit of 20 per cent for "ecofriendly home renovations" – a popular measure that's sure to boost revenue for suppliers and contractors.

Where opposition parties in Quebec have been most effective in needling the government has been on the issue of economic development. Several companies based overseas have scaled back growth plans in the province in recent months in light of tougher business conditions, making the government's campaign pledge to create 250,000 jobs over five years appear ridiculous to some. Highlighting the shortcoming, a senior-level bureaucrat in the economic ministry recently told a committee hearing his department worked without "quantifiable objectives."

"There is no global vision here," said PQ finance critic Nicolas Marceau, noting non-residential business investment in the province this year is expected to be zero. "The 250,000 jobs was a promise, a target. Then it became a myth. And now it's disappeared altogether [in the budget document]. It doesn't exist any more."

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On Thursday, Mr. Leitao sought to build on the government's existing economic plan – one anchored on the Plan Nord and Maritime strategies – and said the government expects to spend $7-billion over the next five years to speed up Quebec's shift to an innovative, clean and digital economy. The spending includes a new electricity rate discount for companies initiating major investment projects in manufacturing and resources, as well as a new business tax credit for major digital-transformation projects.

Business leaders applauded the moves, saying that with very limited available resources, the government is trying to push Quebec's companies to improve their operations. "[This is] giving signals to businesses to kind of get in the action" and do more to create growth, said Françoise Bertrand, president of the Fédération des chambres de commerces du Québec.

"The government could have chosen today to invest all their money in health and education," said Eric Tétrault, head of the Manufacturiers et Exportateurs du Québec. "But they recognized the economic urgency of doing something now."

One of the key challenges Quebec faces is an aging population. Forecasters have been warning for years of an impending decrease in the potential labour pool as more and more people leave the work force. Now, it's happened – the number of Quebeckers aged 15 to 65 is declining in absolute terms.

The government is trying to create incentives to work and improve training, with the thinking that greater productivity will foster greater economic growth. To that end, it announced three new tax measures, including the enhancement of so-called "work premiums," which are designed to get people off last-resort financial assistance and join the labour market.

Powered in part by stronger international exports, the government projects Quebec's economy will grow 1.5 per cent this year and 1.6 per cent next year. The Coalition Avenir Québec opposition party said the government appears resigned to accept that tepid growth. Others say that in a world with so many unknowns, that might be as good as it's going to get.

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"I think we have to get used to it," said Mr. Tétrault. "There's not enough people in the marketplace, there's not enough ideas, there's not enough projects for us to be able to hope for the 3 to 4 per cent GDP growth we used to have in previous years."



  • Maintains budget balance while paying down $2-billion of debt this year. Goal is to bring the current debt ratio of about 55 per cent of GDP to 45 per cent by 2026.
  • Lowers projections for Quebec’s economic growth slightly to 1.5 per cent for 2016. Government says despite global uncertainty, Quebec’s economic climate remains “favourable.”
  • Government making it a priority to invest in education. Additional investments of $1.2-billion to improve service to students and improve schools. Education spending to be raised to 3 per cent for 2016-2017 from 0.9 per cent last fall.
  • A new tax credit of 20 per cent for ecofriendly home renovations.
  • Easing the burden of existing daycare fees: Government offering parents a 50-per-cent reduction in their additional contribution for a second child in subsidized childcare. Measure is retroactive.
  • A new electricity rate discount for businesses in manufacturing and resource sectors representing up to 50 per cent of the investments made.

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