Canada sees bigger surplus in time for 2015 election

Tue Nov 12, 2013 5:49pm EST
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By Nia Williams

EDMONTON (Reuters) - Canada is in better fiscal health than previously thought, the Conservative government said on Tuesday, predicting it would run a sizeable budget surplus in time for the 2015 federal election, the result of spending restraint and asset sales.

In its fall fiscal update, the finance ministry estimated a surplus of C$3.7 billion ($3.5 billion) in the 2015-16 fiscal year, up from its March 2013 forecast of an C$800 million surplus.

The figures include a C$3 billion cushion for risk, which means the underlying surplus could be that much bigger.

The fiscal outlook has brightened because weaker revenues have been more than offset by lower program spending as well as the expected effects of asset sales and a two-year freeze on departmental operating budgets.

The positive turn is good news for Prime Minister Stephen Harper, who promised in the 2011 election campaign to introduce personal income tax cuts estimated to cost C$2.5 billion a year once the budget is balanced. The government is expected to revive that promise in hopes of getting re-elected in October 2015.

"Our plan was always to get to a balanced budget in 2015/16 to create room so that other initiatives can be undertaken, whatever they are," Finance Minister Jim Flaherty told reporters after delivering the report.

Canada's federal budget deficits have paled in comparison with those of the United States, even adjusting for the fact that the U.S. economy is nine times as big. Washington posted a $680 billion gap for the fiscal year that ended in September.

Canada had run 11 straight surpluses before tipping into deficit in 2008/09 as the result of Conservative tax cuts and then the global recession. The deficit peaked at C$55.6 billion in 2009/10 because of major stimulus spending.   Continued...

Canada's Minister of Finance Jim Flaherty talks to the media prior to holding pre-budget consultations with the business community in Toronto, November 7, 2013. REUTERS/Mark Blinch