Canada's Federal Finance Minister Chrystia Freeland is set to deliver the 2022 budget on Thursday at 4pm Eastern Time. Freeland has at times sounded more fiscally prudent than Prime Minister Justin Trudeau, but all the advance leaks and rumours suggest that the Government will be pressing ahead with new social spending, partly driven by the terms of its new definitely-not-a-coalition deal with the NDP.
The economy has been growing solidly, which is likely to mean that the expected path of revenues is stronger now than appeared likely when the Government posted its last fiscal update in the Fall of 2021. The surge in global oil prices in the wake of the Russian assault on Ukraine is also providing a windfall for the Federal government, as well as energy-producing provinces such as Alberta and Saskatchewan. This may make it possible for Freeland to introduce fresh spending measures without ballooning the deficit.
At the same time, with inflation running at a three-decade high and increasing evidence that the economy, especially the labour market, is close to overheating, rhetoric from the Bank of Canada is becoming increasingly strident, not to say panicky. The last thing the Bank needs right now is a Federal fiscal stance that further complicates its task of keeping inflation in check. This article from the Financial Post (NB -- definitely not a pro-Trudeau paper) summarizes the risks as many in the business community see them. Should be an interesting budget all around.
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