OTTAWA – The federal government recorded a massive surplus in December, the first since last June and the largest one-month windfall since the recession in what some see as the beginning of the stretch drive to a balanced budget.
While the Finance Department’s monthly reports on Ottawa’s fiscal position can swing wildly, the $1.15 billion of black ink was the most encouraging since the 2008-09 recession when the government fell into a deep deficit.
For the fiscal year so far, Ottawa is still $12.7 billion in the red, but even that is $1.7 billion ahead of last year’s pace and well within the range expected if Finance Minister Jim Flaherty is to meet the $16.6-billion deficit he project for the fiscal year in his most recent budget.
The other encouraging aspect of the accounting is that the biggest reason for December’s bounty was that it was mostly due to robust revenues from both personal and business receipts.
In tabling the budget earlier in February, Flaherty said he was still looking toward fiscal year 2015-16 as the target for returning to balance, but many observers believe the finance minister will get there quicker.
Analyst Mary Webb of Scotiabank says it’s understandable that such a surprisingly strong month would spur talk of a balanced budget sometime in 2014, but added it is too early to jump on that bandwagon.
“With all the savings they’ve booked, you are never quite sure how this is being fed through the monthlies,” she said. “But every time we get an upbeat release like this it will lead to speculation about whether he is balanced or close to balance in 2014-15.”
The government also got some good news from Statistics Canada on Friday with a report that fourth-quarter 2013 economic growth came in at 2.9 per cent, almost a half-point higher than expected.
Webb said she believes Flaherty will indeed eliminate the deficit in the 2015-16 year a planned, but to do it faster would entail many factors, including realizing big gains from cutbacks in the public service and from booked asset sales, which have yet to materialize.
The Harper government is counting on a balanced budget prior to the expected October 2015 election since the prime minister has promised several campaign goodies, including limited income splitting for families, once the deficit is eliminated. The government has been in deficit since 2009.
In Friday’s report, Finance said revenues had increased by $1.7 billion in December, or 7.9 per cent, with corporate, personal and GST revenue streams all increasing.
Meanwhile, program expenses rose a meagre $100 million, or 0.5 per cent, while debt charges fell by about $200 million.
For the first nine months of the fiscal year, which ends in March, revenues are up $7.5 billion, or 4.1 per cent over the same period last year, while expenses have climbed by $6.2 billion, or 3.5 per cent.