(Ottawa) The Business Council of Canada is urging Finance Minister Chrystia Freeland to exercise the utmost fiscal prudence and avoid costly new measures when she presents her economic and financial update next month.
For example, the creation of a new national universal drug insurance program or substantial investments in housing construction must be put on hold due to the economic slowdown and high interest rates which reduce the margin of Ottawa’s financial maneuver, says the president and CEO of the Business Council of Canada, Goldy Hyder.
A national drug insurance program alone could cost up to $13.4 billion per year, according to recent calculations by Parliamentary Budget Officer Yves Giroux.
In a letter he sent to the country’s big money maker, Mr. Hyder warns that widening deficits to finance new measures would be a recipe for disaster. Especially since the days of low interest rates are over.
“Increased deficit-financed spending and higher interest rates will inevitably lead to debt levels that will force future governments to cut spending and raise taxes. This will lead to a weakened economy with considerable uncertainty for businesses looking to invest, hire and grow in Canada. It will also jeopardize the social programs that Canadians value. This is precisely what we must avoid,” he warns in this letter, which La Presse obtained.
Without going so far as to call for a return to balanced budgets in the short term, Mr. Hyder strongly suggested that Ottawa establish clearer guidelines by ensuring that interest charges on the accumulated debt do not exceed 10%. of all annual revenues of the federal government. According to him, this is the best formula to protect social programs.
“As useful and important as the measures envisaged may be, financing them with borrowed money is unwise and will only exacerbate the precariousness of our public finances,” he said. He stressed that the Canadian economy will suffer the repercussions of the shocks caused by the war between Israel and Hamas, the continuing conflict in Ukraine and the diplomatic coldness between Canada and two heavyweights in the world economy, China and the ‘India.
At the end of the week, the New Democratic Party warned that it could end the agreement that ensures the survival of Justin Trudeau’s government in the House of Commons if it does not quickly begin work on a new national education program. Drug insurance. The end of this agreement could lead to early federal elections, with the Liberals being in the minority in the Commons.
Also last week, the Parliamentary Budget Officer indicated that the projected deficit in 2023-24 is expected to reach $46.5 billion, $6 billion more than forecast just six months ago, due to slower revenue growth, higher spending and rising interest rates.
Tuesday, the Minister of Finance defended the Trudeau government’s management of public finances during a press conference. She argued that major rating agencies have maintained Canada’s AAA credit rating and that the International Monetary Fund, in a recent report, confirmed that Canada is in a favorable position.
For several weeks, the Conservative Party has been pushing the Trudeau government to present a plan to return to balanced budgets in order to put an end to “its inflationary deficits.”
“Last fall, the Minister of Finance promised that the budget would be balanced within six years. Last spring, she broke that promise and said we could never balance the budget. Last week, the Parliamentary Budget Officer revealed that its deficit was now 15% higher than what it had announced only six months ago,” Conservative Leader Pierre Poilievre said on Monday. He subsequently accused the Trudeau government of having “lost control of our debt.”
Ms. Freeland replied that she would take stock of the situation of public finances in her economic update, noting in passing that Canada has the lowest deficit and the lowest debt-to-GDP ratio in the G7. “When it comes to Canada’s financial situation, I will be very clear: Canadians should listen to the independent rating agencies whose job it is to assess Canada’s situation, not the partisan attacks from the opposition, which denigrate Canada . Canada’s AAA rating has been reaffirmed by rating agencies since the budget was presented. Our finances are strong,” she said.
