Federal Liberal government provides economic update; Completes first 30 days

Finance Minister Bill Morneau has released his “Update of Economical and Fiscal Projections 2015,” which builds on the Parliamentary Budget Officer’s downgraded economic forecast. The federal government maintains that the Canadian economic outlook is likely to result in a deficit of over $3 billion deficit by year’s end – which differs from the Conservative estimates of a $2.3 billion surplus from earlier this year. The report suggests economic contraction occurred in the first half of 2015, and forecasts modest GDP growth in the second half of the year. Some of this is attributable to lower-than-expected oil prices and a weak Canadian dollar.

While deficits are part of the new government’s plan to spend on infrastructure, and provide some limited tax changes, today’s report was designed to position the fiscal context as a less-than-rosy situation inherited from the Conservatives.  It also establishes a narrative to possibly allow the Liberals to exceed the $10 billion deficits projected during the election. For their part, the Conservatives countered that the government’s figures differed from those of the Parliamentary Budget Officer (PBO).

A new session of Parliament will begin on December 3, 2015, and the Liberals will use this narrative to shield themselves from opposition criticism as they set about navigating the country’s economy and launching its plans for economic stimulus.

Though the government has moved into deficit earlier than expected, the Liberals refrained from outlining any solutions that may appear in Budget 2016.

Trudeau Government: The first 30 days

In the first 30 days since the federal general election, it has been a busy month for the new government. The Liberals have moved quickly to fulfill some campaign promises that do not require legislative action, including by reinstating the mandatory long form census, dropping the legal effort to ban niqabs at citizenship ceremonies, and publishing each Minister’s mandate letters.

As happens with every government, however, unanticipated domestic and international events stand in the way of a government’s plans. Some have compelled the Government of Canada to respond to emerging issues in a manner that is not necessarily supported by platform policy, such as Montreal’s discharge of untreated wastewater.  Others, such as the terrorist attacks in Paris, have created a different context for campaign commitments, including Canada’s acceptance of 25,000 Syrian refugees and the mission against ISIS.

The range of decisions made to date provides us with some insight into the Liberal government’s desired pace of change. As is typical, the Trudeau government wants to be seen hitting the ground running, so it has been deliberate in choosing initiatives to advance that are clear “wins.”

Leadership Team Staff Being Assembled

It is important to keep in mind that initiatives are being undertaken, and events are being reacted to, as the Prime Minister’s senior leadership works behind the scenes to develop the political backbone of the government. To date, only a relative handful of ministerial chiefs of staff have been hired for Ministers. As a result, Ministers are currently relying heavily on their Deputy Ministers and departments, as well as seeking input from the centre (Prime Minister’s Office). In some cases, Ministers are holding meetings without any political staff support, and they are taking their time to make the right choices before they staff up the rest of their offices. This means that policies and initiatives are being driven by a small group of decision-makers around the Prime Minister who are attempting to be deliberate while juggling an inordinate number of balls.

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Parliament Returns December 3

The return of Parliament on December 3rd will bring with it a flurry of activities before the year’s end. Key items will include the Speech from the Throne on December 4th, and an economic update that will include a mini-budget focused on the income tax measures that the government hopes to have in place by January 1, 2016. The Throne Speech will follow the tone and tenor of the campaign platform, and will reflect the content of the Ministerial mandate letters released last week. A summary of these can be found below.

The Throne Speech will give a better sense of timeline for action on these ambitious Ministerial priorities and the roadmap ahead for the new Government of Canada. At the same time, the opposition parties (one of which is well-versed in the pitfalls of governing) will be looking for opportunities to exploit the inexperience of Ministers and a political leadership that does not yet have the resources it needs.

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