The improved economy is expected to give the Trudeau government more fiscal room than anticipated in next week's pre-election budget -- but a wobbly economic finish to 2018 means conditions could look much different as the October vote approaches.
An abrupt deceleration in economic growth over the final three months of 2018 has dimmed the outlook for this year. Last week, the Bank of Canada predicted a weaker economic performance through the first half of 2019, compared to its previous forecast of just a short slump.
Scotiabank chief economist Jean-Francois Perrault said larger-than-expected government revenues last year mean Ottawa could have as much as $5 billion more than it had predicted in its November update to dedicate to new pre-election spending, or even tax cuts. CIBC chief economist Avery Shenfeld also sees the Liberals in a stronger fiscal starting position, but with economic headwinds in the forecast.
Morneau has said his fourth budget will focus on helping workers get the skills they need and on ensuring seniors feel optimistic about their futures. The government, he added, is looking for ways to make homes more affordable for millennials, while keeping the housing market stable. The Liberals' fiscal record has faced regular criticism from the Opposition and some economists. In particular, the Conservatives have targeted the Liberals over their decisions to ditch their 2015 election vow to run only modest annual shortfalls and to eliminate the deficit by 2019.
Morneau has shifted his focus to reducing the net-debt-to-GDP ratio -- a way of describing how burdensome debt is, relative to the national economy-- each year.
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