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   From: {~_~}@nyet.ca   
      
   financialpost.com | April 28, 2014   
      
      
   Ottawa on track to hit surplus ahead of schedule, but penny pinching   
   will have its costs   
      
      
   OTTAWA — After some tough years of spending restraints, Canada’s economy   
   is soon expected to return to normal levels of growth and possibly get   
   back to budget surpluses ahead of schedule.   
      
   But climbing out of hefty annual deficits and ensuring the country again   
   reaches its potential output comes at a cost, according to the federal   
   budget watchdog.   
      
   In particular, the Conservative government’s fiscal policies — although   
   often lauded for helping to support Canada’s recovery from the 2008-09   
   recession — also limited the pace of that growth, as well as job creation.   
      
   In its latest economic and fiscal outlook, the Parliamentary Budget   
   Office acknowledged Monday that last year’s economic growth of 2% was   
   0.4 points higher than its projections.  It now expects gross domestic   
   product to expand by 2.1% in 2014 and 2.7% the year after that, and then   
   remain above its potential growth rate well into 2018.   
      
   “[But] this solid growth is the result of higher domestic and external   
   demand, partly offset by government spending restraint acting as a drag   
   on economic activity and job creation going forward,” said the PBO,   
   headed by Jean-Denis Frechette.   
      
   “When these measures are combined with the spending, savings and revenue   
   measures, as well as revisions to spending levels introduced beginning   
   in Budget 2012, the level of real GDP is projected to be 0.5% lower in   
   2016 than would have been the case in the absence of these measures,”   
   the outlook says.   
      
   “Further, this economic impact translates into about 46,000 fewer jobs   
   being created by 2016.”   
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   Nevertheless, the PBO says Ottawa appears closer than previously thought   
   to balancing its budget, thanks to signs of an improving U.S. and global   
   economies, and ongoing government spending restraints.   
      
   In the government’s Feb. 11 budget — presented by then-finance minister,   
   Jim Flaherty — the deficit was forecast to shrink to $2.9-billion this   
   fiscal year —from a final calculation of $16.6-billion in 2013-14 — and   
   return to a surplus of $6.4-billion by 2015-16, coinciding with a   
   federal election.   
      
   But the PBO says there is a 50% chance of balancing the budget in   
   2014-15.  It expects a 2013-14 shortfall of $11.6-billion, followed by a   
   deficit of just $500-million this fiscal year — within striking distance   
   of breaking into the black.  For 2015-16, the PBO predicts a surplus of   
   $7.8-billion.   
      
   “A budgetary surplus could be achieved in 2014-15… if revenues rebound   
   at a higher rate than expected, or if departments underspend at the same   
   rate as fiscal 2009-10 to 2012-13,” the PBO says.   
      
   Many economists agree that Mr. Flaherty, who died shortly after   
   resigning in March, had arguably already taken the government’s books   
   out of a deficit, but was holding off declaring victory until the   
   declared balanced target of 2015-15.   
      
   “Jim Flaherty didn’t live to see it, but unless economic growth   
   seriously disappoints, his last budget [in February] delivered the   
   surplus he was seeking as his political epitaph,” said Avery Shenfeld,   
   chief economist at CIBC World Markets.   
      
   The quicker pace of deficit reduction was evident last week in a Finance   
   Department report that showed the most recent tally, for 11 months of   
   this fiscal year, put the shortfall at just $5.4-billion. However,   
   economists say the final months of any fiscal year can be volatile due   
   largely to end-of-year expenses, such as tax refunds.   
      
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