OTTAWA – Finance Minister Joe Oliver says Ontario is facing a difficult economy, but is urging Liberal Premier Kathleen Wynne to aggressively take on the province’s growing deficit in next month’s post-election budget.
The Liberals, who won a majority in last week’s provincial election, are expected to re-introduce essentially the same budget they were defeated on when the legislature returns July 2 — including adding more than $1 billion to the deficit to take it to $12.5 billion.
Without going into specifics, Oliver told reporters Monday he would prefer if the budget was more aggressive in tackling the deficit.
“The premier will have to confront some tough fiscal decisions and we hope her government would follow our lead toward a balanced budget in Ontario,” he said.
Oliver made the comment Monday after a closed-door meeting with more than a dozen private sector economists called to update Ottawa on the economy. The meeting was billed as a get-acquainted session for the minister, who took over the portfolio in March and will be charged with tabling his first budget next spring.
As expected, the most recent forecasts are little changed from what the late Jim Flaherty incorporated in his February budget. Real growth in 2014 is projected to be a tick lower at 2.2 per cent — largely because of the poor, weather-influenced first quarter of the year — but nominal growth, which is more directly tied to tax revenues — is expected to be slightly higher thanks to strong oil prices.
Economists speaking to reporters after the meeting said despite some significant developments since February, the overall forecast of moderate growth for the Canadian economy remains largely intact.
“Even though we’ve had a very bad winter, we had a weak first quarter, there’s some global risks that have increased attention, there’s some additional geo-political risks, nevertheless the assumptions haven’t fundamentally changed,” explained TD Bank chief economist Craig Alexander.
One of the new key risks, said chief economist Doug Porter of BMO Capital Markets, is that the Iraq crisis worsens and triggers a spike in oil prices, which could impact global growth.
The net result, said Oliver, is that barring an unforeseen shock Ottawa will almost certainly balance the budget next year for the first time since 2007.
Porter said Ottawa may actually get there sometime during the current fiscal year.
The timing is significant because the Conservatives are banking on a surplus in the 2015-16 to enable them to introduce some form of income splitting in time for the fall 2015 election, thereby fulfilling a campaign promise of four years ago.
Oliver has been critical of Ontario’s handling of its fiscal books before, most recently last week when he scolded the country’s most populous province, along with Quebec, about their high deficits and debt.
“Canada cannot arrive at its potential if the biggest province remains in difficulty,” he told a conference in Montreal.
For his part, the minister said he intends to continue pursuing a “low tax” plan while keeping his eye on the fiscal balance, which he said was a key to long-term prosperity in Canada.
Since assuming his role as the government’s point man on the economy, Oliver has mostly followed the script laid down by his predecessor in his strict focus on eliminating the deficit. He will have an opportunity to again stress the point on Wednesday during a video teleconference with provincial finance ministers.
Oliver has differed, however, with Flaherty’s hands-on approach to Canada’s real estate market, and particularly mortgage rates. He re-stated Monday that he will not intervene on home lending rates, although he intends to diminish further Canada Mortgage and Housing Corp.’s share of the mortgage insurance sector.
The Paris-based OECD recommended last week that Ottawa reduce the percentage of a mortgage loan CMHC insures from the current 100 per cent, and Oliver said that is one avenue the government could pursue to achieve the goal.
Still, he stressed that he did not believe Canada had a “housing bubble,” but rather that it was heading toward a soft landing from record highs.
Alexander noted that while sales have picked up this spring, particularly after the poor winter months, Canada is “not seeing booming sales,” as would be expected in a bubble.