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Freeland’s fall economic statement to target affordability, U.S. competition amid scrutiny over spending [1]

['Bill Curry', 'Stephanie Levitz', 'Deputy Ottawa Bureau Chief']

Date: 2024-12-15 20:07:25-05:00

Open this photo in gallery: Deputy Prime Minister and Minister of Finance Chrystia Freeland holds a press conference at the National Press Theatre in Ottawa on Nov. 25.Sean Kilpatrick/The Canadian Press

Caught in a squeeze between Canadians wanting more help to ease the high cost of living and U.S. president-elect Donald Trump’s incoming administration making demands of its own, Finance Minister Chrystia Freeland is set to deliver an economic update that will also look to justify a recent wave of new deficit-financed spending.

Ms. Freeland’s fall economic statement will contain new measures targeting affordability and positioning Canada to compete with the U.S., a senior government official told The Globe and Mail on Sunday, though they declined to provide specifics.

The measures follow a series of recent announcements that touch on both categories, including the two-month GST holiday on a range of popular products that began on Saturday and Friday’s announcement of business-focused tax breaks and incentives.

The Globe is not naming the official as they are not authorized to publicly discuss Monday’s fiscal document.

Both Ms. Freeland and Public Safety Minister Dominic LeBlanc have previously said Monday’s statement will respond to the pre-emptive threat issued by Mr. Trump of a 25-per-cent tariff on Canadian goods without action to strengthen the border.

On public safety, that spending could include the purchase and deployment of new technologies and more people to beef up security.

The fall economic statement will also lay out new measures to counter what Ms. Freeland called Mr. Trump’s “strategy to discourage investment anywhere other than the United States.”

“Canada is going to fight for Canada,” she said Friday.

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On Sunday, the government also announced the coming-into-force of changes to mortgage rules to help reduce payments, saying Monday’s statement would contain “further action” on housing affordability.

Ms. Freeland will deliver the statement on the penultimate day of the fall sitting in the House of Commons, with MPs scheduled to return to their ridings on Tuesday evening.

The Liberal minority government is under pressure from the New Democrats to broaden out another new spending promise, $250 cheques to working Canadians earning under $150,000.

The cheques are yet to be cut because no other party will support the required bill, but if Ms. Freeland moves on the NDP demands, it could mean the New Democrats will commit their votes to helping the legislation pass the Commons.

There are also internal political dynamics.

The Globe reported that the $6.28-billion plan to provide the GST holiday and $250 cheques led to friction between Ms. Freeland’s office and that of Prime Minister Justin Trudeau, with Finance believing the plan was fiscally unwise while the PMO believed it would be a political winner.

One test might come Monday in a by-election in the B.C. riding of Cloverdale-Langley City. The Liberals won the riding from the Conservatives in 2021, but the MP stepped down to run provincially and observers believe the seat could flip back to the Tories.

Former finance minister Bill Morneau, who has spoken out previously about disagreements between him and Mr. Trudeau over fiscal matters, told CTV’s Question Period on Sunday that tension between the two offices is to be expected, but that it is also likely exacerbated by the current level of government spending.

“I think that the level of tension is likely to be higher because of our situation,” he said.

“We need to be careful to have the fiscal capacity to do the things that are going to be important, both in the immediate term, around dealing with the Trump possibility of tariffs, and the longer term to ensure that we’re focused on economic growth that can benefit all Canadians.”

In last year’s fall economic statement, Ms. Freeland laid out three fiscal objectives to guide spending: keeping the deficit for the 2023-2024 fiscal year at or below $40.1-billion; lowering the debt-to-GDP ratio in 2024-2025 and keeping it on a declining track thereafter; and keeping deficits below 1 per cent of GDP in 2026-2027 in future years.

Ahead of the update’s release, Ms. Freeland said the government will continue lowering the debt as a share of the economy over the medium term.

But, she’s repeatedly declined to recommit to keeping the deficit below $40.1-billion.

Parliamentary Budget Officer Yves Giroux said in October that the deficit for the 2023-2024 fiscal year is on track to be $46.8-billion, missing the target, though he has cautioned that he cannot be certain.

Conservative Leader Pierre Poilievre has chided the government over the numbers, accusing Mr. Trudeau of pressing Ms. Freeland to break through her self-imposed guardrails, and “pushing all Canadians off the fiscal cliff.”

Randall Bartlett, senior director of Canadian economics with Desjardins, said one of the main things he’s watching for on Monday is how the government accounts for the large amount of uncertainty over the coming year, including that created by Mr. Trump’s threats.

In this environment, Mr. Bartlett said he’d like the government to publish positive and negative alternative scenarios, in addition to its core forecast.

“The thing I’m most curious to find out on Monday is, what is the economic outlook that the federal government is basing its fiscal assumptions on?” he said.

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[1] Url: https://www.theglobeandmail.com/politics/article-freelands-fall-economic-statement-to-target-affordability-us/

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