OTTAWA – Finance Minister Jim Flaherty has dismissed a prediction of deeper, longer-term deficits from Parliament’s budget watchdog.
He rejected analysis from Kevin Page, the parliamentary budget officer, that major spending cuts or tax hikes will be the only way to get Canada out of the red within five years.
Past warnings from Page have proven accurate. But Flaherty says he’s off-base this time, because the bleak prediction is based on unduly pessimistic economic-growth projections.
“He’s wrong,” Flaherty told journalists in a conference call from a G8 finance ministers’ meeting in Lecce, Italy.
“Because he says growth rates likely will be slower than I had predicted. Now, if you make an assumption with respect to lower growth rates, then you get the results that he postulates.
“But anybody can do that.”
The government says it should easily return to surpluses after five years, as the economy improves and higher federal revenues restore Ottawa’s balance sheets.
However, since the last election campaign, the government’s projections have consistently been rosier than reality.
The Tories were promising a balanced budget until the end of the year, then tabled a $34 billion deficit in January, and finally ramped up their deficit forecast last month to more than $50 billion.
Over that time Page, and several private-sector analysts, have repeatedly warned that the books were in worse shape.
The Toronto Dominion Bank now projects $167 billion in deficits over five years – almost double what the government forecasts – and expects a $19.4 billion deficit in 2013-14, the year Flaherty foresees a return to surplus.
Page has said that he can’t envision a five-year return to surplus without a government move to significantly cut spending or increase revenue.
The Bank of Canada expects the economy to shrink 3 per cent this year – almost quadruple the 0.8 per cent drop forecast in Flaherty’s January budget.
As for the post-recession period, Flaherty projects relatively robust growth of 2.4 per cent next year and 3 per cent in 2010.