Finance minister delays target to balance books by two years
Quebec, Canada’s second-largest province, expects to have higher budget deficits for years to come as the economy slows and wages rise for public sector employees.
Finance Minister Eric Girard delayed his target to balance the books by two years, to the fiscal year that ends in 2030, in budget documents released Thursday. It’s a change of fortune for a government that one year ago announced income-tax cuts and said budget shortfalls would rapidly shrink to almost nothing.
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This time, Quebec’s fiscal forecast paints a darker picture. The government sees a deficit of $11 billion for the fiscal year that begins on April 1, $8 billion higher than it expected only four months ago. It’s the third large Canadian province to release a budget in recent weeks, and in every case there has been a notable deterioration in government finances.
To pay for it, Quebec will need to tap the bond market aggressively. The government’s projected financing needs for the coming year are $36.5 billion, a 70 per cent increase from the current year. The figure includes money needed to repay maturing debt.
This is the sixth budget for Girard, a former treasurer of National Bank of Canada, who was re-elected in 2022 as part of a landslide win for Premier Francois Legault and the Coalition Avenir Quebec party, which has since lost ground to the separatist Parti Quebecois in opinion polls. Legault’s nationalist government has sought to attract more investment to the French-speaking province of nine million people, notably in the electric-vehicle supply chain, and to reduce the wealth gap with Ontario, its larger, richer neighbour.
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“It is a challenging and responsible budget in a difficult economic context,” Girard said during a press conference in Quebec City. He announced measures to generate billions in revenue and savings over the next five years — reducing tax breaks for technology companies, hiking taxes on tobacco and conducting a major review of government expenses. “The return to a balance will necessitate real gestures, but it’s feasible.”
Quebec is in the throes of an economic slowdown. The province, while blessed with an unemployment rate that’s below the national average, is expected to grow just 0.6 per cent this year and 1.6 per cent in 2025, according to government forecasts.
It has also been hurt by dry weather. Hydro-Quebec, a government-owned utility that exports electricity to the U.S. market, has been grappling with lower water levels in reservoirs, leading to a $1.5 billion shortfall in revenue.
At the end of last year, the government reached an agreement with 600,000 public workers, including teachers, that led to wage increases of 17.4 per cent over five years. The new contracts, and others that are still being negotiated, will add more than $3 billion annually to costs, according to government estimates.
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Over the next three fiscal years, deficits are expected to total more than $23 billion, up about $18 billion from projections in November. The figures include contingency reserves and billions in contributions to the Generations Fund, a reserve fund that’s dedicated to future debt payments and managed by the Caisse de Depot et Placement du Quebec. The figures could change, of course, if economic growth comes in faster than the government’s long-term forecast.
Girard said the government must boost the average annual growth rate of revenue from 3.3 per cent to 4.4 per cent, while maintaining spending growth at 2.9 per cent, to reach a balanced budget.
Quebec’s finances had improved significantly until the pandemic, helped by strong universities and healthy financial and technology sectors, and budget changes brought in by the previous Quebec Liberal Party government. It remains one of the highest-ranked Canadian provinces with a credit rating of AA- by S&P Global Ratings. Its net-debt-to-GDP ratio, currently 39 per cent, is expected to rise in the short term, but the government promises to reduce it to 30 per cent by 2038.
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Girard announced about $100 million over five years to support two of Quebec’s strategic industries, aerospace and aluminum, but made few changes to business taxes or incentives. “Most corporations can therefore expect their tax position to remain similar for the upcoming year, except for the IT sector where there are some losses,” Kimrang Te, a fiscal expert with Ernst & Young LLP, said in an interview.
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The new deficits show “there is no plan to the return to a balanced budget,” said Frederic Beauchemin, a lawmaker from the opposition Liberal Party who used to be a banker at Bank of Nova Scotia. “The CAQ’s strategy is to wait for the Bank of Canada to lower rates. It’s a government that’s losing control.”
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OTTAWA – The federal government is expected to boost the minimum hourly wage that must be paid to temporary foreign workers in the high-wage stream as a way to encourage employers to hire more Canadian staff.
Under the current program’s high-wage labour market impact assessment (LMIA) stream, an employer must pay at least the median income in their province to qualify for a permit. A government official, who The Canadian Press is not naming because they are not authorized to speak publicly about the change, said Employment Minister Randy Boissonnault will announce Tuesday that the threshold will increase to 20 per cent above the provincial median hourly wage.
The change is scheduled to come into force on Nov. 8.
As with previous changes to the Temporary Foreign Worker program, the government’s goal is to encourage employers to hire more Canadian workers. The Liberal government has faced criticism for increasing the number of temporary residents allowed into Canada, which many have linked to housing shortages and a higher cost of living.
The program has also come under fire for allegations of mistreatment of workers.
A LMIA is required for an employer to hire a temporary foreign worker, and is used to demonstrate there aren’t enough Canadian workers to fill the positions they are filling.
In Ontario, the median hourly wage is $28.39 for the high-wage bracket, so once the change takes effect an employer will need to pay at least $34.07 per hour.
The government official estimates this change will affect up to 34,000 workers under the LMIA high-wage stream. Existing work permits will not be affected, but the official said the planned change will affect their renewals.
According to public data from Immigration, Refugees and Citizenship Canada, 183,820 temporary foreign worker permits became effective in 2023. That was up from 98,025 in 2019 — an 88 per cent increase.
The upcoming change is the latest in a series of moves to tighten eligibility rules in order to limit temporary residents, including international students and foreign workers. Those changes include imposing caps on the percentage of low-wage foreign workers in some sectors and ending permits in metropolitan areas with high unemployment rates.
Temporary foreign workers in the agriculture sector are not affected by past rule changes.
This report by The Canadian Press was first published Oct. 21, 2024.
— With files from Nojoud Al Mallees
The Canadian Press. All rights reserved.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
The Canadian Press. All rights reserved.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
The Canadian Press. All rights reserved.
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