After towering deficit and focus on competition, finance minister says he's just getting started

OTTAWA — Finance Minister François-Philippe Champagne indicated Thursday that the Carney government is just getting started in trying to overhaul the Canadian economy, telling a Toronto audience that it’s time to “double down” on investing in competitiveness and growth.

The Carney government unveiled its first budget Tuesday, focusing much of its new spending and policy moves on trying to strengthen the economy over the long term following a range of new American tariffs earlier this year on Canadian exports.

As part of his post-budget “road show” to sell the government’s fiscal plan, Champagne made it clear that the new budget is a starting point, not the finish line.

“Competition is central to productivity and innovation and affordability,” he said during an event at the MaRS innovation hub. “We’ve started but there’s so much more to do.”

Many of the new budget’s key measures were designed to improve the Canadian economy’s long-term competitiveness and ability to export beyond the United States, with a particular focus on boosting corporate investment. The budget’s biggest expenditures have been allocated to areas such as new infrastructure, defence, housing, and skills upgrades. It also included cuts to the public service, following a number of years when the size of the bureaucracy increased by about seven per cent annually.

Economists say that competitiveness and productivity — a measure of how efficiently a company or economy can make things — are critical to strong economic growth.

Champagne also emphasized in Toronto the importance of improving competitiveness in consumer markets, notably in banking and cell phone rates and other telecommunications services.

David Dodge, former governor of the Bank of Canada and a frequent critic of the lack of emphasis on economic growth in recent Canadian policy, told National Post this week that the government’s budget should be seen as the first thrust in a series towards boosting growth. “It is budget number one in what is obviously a two-to-three-stage process.”

Dodge said the government’s extra borrowing will be worth it if it triggers private sector investment and helps get major infrastructure projects completed.

But the extra borrowing will also mean a more expensive national debt. The government’s additional spending, in sharp contrast to its pre-budget austerity warnings, is expected to boost this year’s deficit to $78.3-billion, the third-highest in Canadian history and the largest ever in a non-pandemic year. The Carney government’s forecast calls for modest dips in the annual deficit over each of the next four years, although the cumulative effect will be another $320-million of new debt before the end of the decade.

The federal government has now accumulated $1.27-trillion in debt, almost half of which has been added over the last five years. With the budget’s updated forecast for this fiscal year, Ottawa is now on pace to amass $593.1-billion in debt over that five-year span, or 46.7 per cent of the total debt accumulated in Canadian history.

Champagne emphasized Thursday at MaRS, a location symbolic of the government’s push for more innovation and competitiveness, that the budget’s extra spending was needed because Canada must “seize the moment” as it fights trade wars with both the U.S. and China and other headwinds such as a slowing global economy.

The government’s efforts to use post-budget stops such as the MaRS visit to try to sell the new fiscal plan, a perennial element of the budgetary cycle, is more important this year than usual. The Carney government began the week three MPs short of the majority that would likely make passing the budget a formality. But that shortfall fell by one on Wednesday when Conservative MP Chris d’Entremont crossed over to the Liberal caucus, meaning that Champagne’s budget will need two non-Liberal votes — or abstentions and absences — later this month for it to pass and avoid triggering an election.

National Post

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