Federal government expects $40-billion deficit this year: Freeland

The fall economic update from the federal government projected a $40-billion deficit for the current fiscal year.

The update, delivered on Tuesday by Finance Minister Chrystia Freeland, acknowledged the cost-of-living crisis and the increased financial pressure Canadians are facing, but offered few measures to address the issue.

The projected deficit is largely in line with the $40.1-billion projection included in the Liberals’ spring budget. Freeland’s update did not project or predict any return to balance, despite a 2015 promise by Prime Minister Justin Trudeau to deliver a balanced budget in four years.

The update added $20.8 billion in new spending over five years beyond what was included in the spring budget. Some of the new measures are intended to increase Canada’s housing supply, especially when it comes to rentals and affordable homes.

Much of the new spending was previously announced by the federal government, including billions of dollars in subsidies for electric vehicle battery manufacturers.

The Liberal government’s spending habits have come under much criticism from the Conservatives in recent months.

Freeland noted that inflation and a slow economy are putting pressure on Ottawa’s finances, as well as the pocketbooks of Canadians, and pledged to work to keep future deficits in check.

The fiscal update delivered on Tuesday included a goal of keeping deficits below one per cent of Canada’s GDP starting in 2026-27.

According to Statistics Canada, the country’s inflation rate dropped from 3.8 per cent in September to 3.1 per cent in October on a year-over-year basis.

The drop was driven by falling gas prices. Statistics Canada said the price of gas in October fell 7.8 per cent from a year earlier after a 7.5 per cent increase in September.

– With files from The Canadian Press