The Federal Government released it’s “2023 – Fall Economic Update”. We provide our take aways and valuable snippets from the report here.
Comparably, this update does not make large financial investments, and the government also projects a larger deficit of $38.4 billion for 2024-2025 (projected to be $35 billion in March), which they expect will also reduce at a much slower pace than expected. This does not account for any new spending in the next budget. The Federal update also comes in light of the government’s projection that debt to GDP ratio would rise for a second year (2024/2025); all appearing to reflect the economic times (high interest and inflation rates). Payment on interest for Federal debt will rise from $46.5 billion in 2023 to $61 billion dollars next year.
The next 2-3 years may be tough for Canada’s GDP, deficit, inflation, and employment numbers. While the government expects inflation rates to reduce in the coming years (down to 3.8% currently), this does not address the general affordability crisis.
Compared to other years, this statement is largely an update on previous commitments and projects little new spending; $20.8 billion in new spending and tax cutes over the next fiscal year. Much of future spending is slated for the 2025 budget, in an election year. What the update does focus on is increasing housing supplies nation wide. The housing affordability crisis has spurred the government to focus their message.
Here are some other key take aways and federal commitments from the Report.
- Via the Clean Growth Fund, committing to companies that if price on greenhouse gas emissions drop, the government would compensate them for that difference. The Canada Growth Fund will be the principal federal entity issuing carbon contracts for difference. The fund will allocate up to $7 billion of its $15 billion in capital to issue all forms of contracts for difference and offtake agreements.
- 30-per-cent Clean Technology investment tax credit, expanded to biomass fuel used for heat or electricity generation. 15-per-cent Clean Electricity investment tax credit includes systems that produce electricity or both electricity and heat from waste biomass.
Business, Workforce and Trade
- The federal government will introduce legislation to establish a consumer-driven banking framework that would regulate access to financial data. This framework will ensure that Canadians and small businesses have safe and secure access to financial services and products that help them manage and improve their finances.
- Finance Canada projects that the unemployment rate will rise to 6.5% in the second quarter of 2024, and then reduce to 6.2 (2025) and 5.9 (2026) the following years.
- The Government is moving ahead to remove barriers to internal labour mobility, by leveraging federal transfers, and other funding, to encourage provinces and territories to cut the red tape that impedes the movement of workers, particularly in construction, health care and child care, within Canada.
- Working to eliminate other barriers to internal trade by removing unnecessary federal exceptions in the Canadian Free Trade Agreement.
- New 15-week shareable EI adoption benefit, at an estimated cost of $48.1 million over six years, starting in 2023-24, and $12.6 million ongoing. The benefit is expected to provide approximately 1,700 Canadian families each year
- Proposes up to four additional weeks of EI regular benefits to eligible seasonal workers in 13 economic regions.
Housing and Household
- Commit to clamping down on short-term rental companies like Airbnbby denying income tax deductions incurred to make money from short-term rentals in provinces where such the practice is illegal.
- Building on their commitment to remove GST on purpose built rental construction. The 2023 Fall Economic Statement states that co-operative housing corporations (not including housing with occupant ownership of interest) providing long-term rental accommodation would also be eligible for the removal of the GST on new rental housing, provided the other conditions have been met.
- Offering $15 million in new loans to build rental housing.
- Committed to $1 billion in affordable housing (slated for 2025-2026)
- Looking to repurpose federal land for housing.
- Commit to amend the Competition Act in order to prevent manufacturers from refusing to provide the means of repair of devices and products in an anti-competitive manner.
- Highlighted earlier commitments:
- Amending the Competition Act through Bill C-56, the Affordable Housing and Groceries Act to enhance competition in the grocery sector.
- Establishing a Grocery Task Force, which is supervising the big grocers’ work to stabilize prices, as well as monitoring and investigating other practices in the grocery sector, such as “shrinkflation.”.
- Pharmacare – no update or detailed fiscal plan expected in new year.
- Proposes to exempt professional services rendered by psychotherapists and counselling therapists from the GST/HST.
- The government will advance development of an Indigenous Loan Guarantee Program to help facilitate Indigenous equity ownership in major projects in the natural resource sector.
- Develop a taxonomy that is aligned with reaching netzero by 2050. This work will be supported by external technical experts. The 2023 Fall Economic Statement proposes to provide $1.5 million in 2024-25 to the Department of Finance to support this work.
As the 2024 budget is released in the new year, we look forward to assessing these commitments against results and their service to our community.
– Preeti Sangwan, Policy and Advocacy Advisor, Whitby Chamber of Commerce