The federal deficit will be about $9 billion lower than expected, thanks to a windfall from strong economic growth.
In a fall economic update, federal finance Minister Bill Morneau announced October 24 that the deficit, originally projected to be $29 billion, will come in at $20 billion.
The Canadian economy has been growing at 3.7%, which, for Canada is “absolutely white hot,” said Jock Finlayson, chief policy officer for the Business Council of British Columbia (BCBC).
It’s also unsustainable, and expectations are that economic growth will cool to a more normal level of about 2% next year.
Mush of Canada’s improved financial strength comes from job growth and consumer spending.
“In just two years, over 450,000 jobs have been created, and youth unemployment is the lowest on record,” Morneau said.
Morneau announced two new spending measures as part of the update – an acceleration of an indexing to inflation of the Canada child benefit and an enhanced working income tax benefit, which is aimed at lower income Canadians.
Morneau also announced that the small business tax rate will be lowered to 10% from 10.5% in January 2018, and to 9% in 2019.
Richard Truscott, vice president, Alberta and B.C. for the Canadian Federation of Independent Business, said the tax cut will put money in the pockets of small businesses at a time when government is taking it from other pockets.
"They're being hit with payroll tax hikes, CPP's going to go up, EI's slated to go up, and the provinces are piling on with lots of aggressive policies of their own, like the hike to a $15 minimum wage, the increase in the carbon tax. So the small business tax cut is a very welcome step."