Parliamentary Budget Officer Yves Giroux waits to appear before the Commons Finance committee on Parliament Hill in Ottawa on March 10, 2020. Parliament’s spending watchdog says the estimated federal deficit for the year has likely risen to about $260 billion with new spending measures rolled out in recent weeks. Budget officer Yves Giroux made the comment during an appearance before a Senate committee, which will hear from Bank of Canada governor Stephen Poloz later today. THE CANADIAN PRESS/Adrian Wyld

Federal deficit likely now at $260 billion due to COVID-19, PBO says

Coronavirus programs have added on costs to Canada’s budget

Parliament’s spending watchdog says the estimated deficit for the year has likely risen to about $260 billion, leaving the government with little fiscal firepower to stimulate an economic rebound.

Budget officer Yves Giroux previously estimated the federal deficit at $252.1 billion this fiscal year on account of a sharp increase in spending on emergency aid and a subsequent drop in economic activity related to the COVID-19 pandemic.

Speaking to the Senate finance committee Tuesday, Giroux said the government has added about $7.6 billion in spending since his last report, pushing the potential deficit ever deeper.

Giroux said that level of spending isn’t sustainable for more than a few years. He said emergency aid would have to eventually sunset “otherwise we’ll be looking at a level of taxation that’s not been seen for generations in this country.”

Federal finances could be helped by an economic recovery that would lower the deficit, which Giroux said is feasible alongside balanced, or close to balanced, budgets.

But to get the economy to lift-off speed, as Giroux has said, will require stimulus spending because of the number of businesses already saying they won’t survive the pandemic.

“It’s quite clear right now that there will be some need for stimulus measures. We just don’t know their magnitude, their scope and which sectors … will need more particular assistance,” Giroux told the committee.

Spending would have to be very targeted because, he said, ”there’s not that much firepower left without incurring significant, structural deficits.”

Federal spending to date has topped $151.7 billion, with $40.33 billion going to 8.21 million people through the Canada Emergency Response Benefit. There is $5.7 billion more flowing through a wage subsidy program, according to the most recent figures posted online.

The federal New Democrats have used the $2,000-a-month CERB as an example of why the country should move to a basic income program. Bank of Canada governor Stephen Poloz in a recent interview suggested a CERB-like measure could help the country more easily respond to economic shocks in the future, particularly with little room for the bank’s monetary policy to help.

“If there’s a lesson to be learned, it is that some of the elasticity of those fiscal policies is very attractive,” Poloz told the same committee Tuesday, “like an automatic fiscal stabilizer that could be relied upon in future episodes that would be worth developing more deeply.”

Giroux said a basic income program — generally a no-strings-attached transfer to citizens, often in lieu of myriad targeted benefits — could have lessened the need for the CERB, though not the wage subsidy.

The last time the PBO looked at basic income, it estimated the federal cost at between $76 billion and $86 billion annually.

Giroux said his office will provide an updated cost for the concept in the coming weeks. A basic income would make some federal programs redundant, leading to some savings, but Giroux said early analysis suggests the net cost to be in the billions of dollars.

The bank has not put a firm number on its economic outlook, providing a best- and worst-case scenario for the foreseeable future, citing uncertainty about the course of the pandemic.

Poloz told the committee he believes the best-case scenario is still within reach. He said pent-up demand would play into a “robust recovery,” even if some sectors like travel face financial difficulties.

Giroux said the federal government could easily provide the same kind of best- and worst-case scenarios so Canadians would have an idea about the course of federal finances. He urged the Liberals to table a fiscal update.

He added that his office will update its estimates of federal finances, including the deficit and debt, some time in June.

Jordan Press, The Canadian Press

CanadaCoronavirus

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Comments are closed

Just Posted

Major road project in Towship of Spallumcheen starts Monday

Reconstruction and repaving of 1.4-kilometre stretch of Back Enderby Road to last until October

No abandoned Seadoo found on Coldstream lake

Vernon Search and Rescue crews and RCMP unable to find reported abandoned Seadoo on Kal Lake

Okanagan Science Centre open with pandemic safety measures

The Vernon centre has also added four new entries to its summer camp lineup

Coldstream defenceman warrants U17 camp call

Jace Weir, 16, of the Okanagan Rockets one of 113 players picked for Hockey Canada virtual camp

QUIZ: A celebration of dogs

These are the dog days of summer. How much do you know about dogs?

VIDEO: Musqueam Chief captures captivating footage of bald eagle catching meal

‘This is why we have chosen to live here since time immemorial,’ Chief Wayne Sparrow’s nephew says

300 Cache Creek residents on evacuation alert due to flood risk as river rises

Heavy rainfall on Canada Day has river rising steadily, threatening 175 properties

Kelowna high school football star, water skier, signs with University of Calgary

Isaac Athans, and his family, have a long history of success across various sports in the Okanagan, nationally

First glimpse of Canada’s true COVID-19 infection rate expected mid-July

At least 105,000 Canadians have tested positive for COVID-19 since the coronavirus was identified

Police ramp up efforts to get impaired drivers off B.C. roads this summer

July is dedicated to the Summer CounterAttack Impaired Driving Campaign

Migrant workers stage multi-city action for full status amid COVID-19 risks

‘COVID-19 has exacerbated an existing crisis’

Shuswap resident spots waterspout near Salmon Arm

The rare weather event was spotted early in the morning on July 4.

PHOTOS: B.C.’s top doc picks up personalized Fluevog shoes, tours mural exhibition

Murals of Gratitude exhibit includes at least one portrait of Henry alongside paintings of health-care workers

Okanagan school drops ‘Rebels’ sports team name, citing links with U.S. Civil War

Name and formerly-used images “fly in the face” of the district’s human rights policy, says board chair

Most Read