Beleaguered Liberal government hopes to deliver 'good news' in fall economic update

Finance Minister Bill Morneau hasn't had a lot of wins lately, but today'sfall economicupdate could be an opportunity to bask in the glory of a healthy Canadian economy.

With unemployment down andGDP growing, the Liberalscould take credit for a sound economy to deflect from the sour mood over the rest of Morneau's track record.

Proposed changes to the small business tax regime went over like a lead balloon with many of the country's proprietors, forcing the Liberal government to take a second look.

Morneauhasalso faced uncomfortable questions about his own family fortune, admitting Thursday he likely should have put his considerable holdings in ablind trust after he assumed his current ministerial post.He also took a jab atreporters on Friday, saying he doesn't "report to journalists" on matters of personal finance.

Today, Morneau will hand down a document that is expected to be much more rosy than some of the headlines he hasfaced this year. As CBC News first reported Monday, the minister is expected to announce a boost to payments made to families under the Canada Child Benefit (CCB) program.

Morneauis also expected to bolster the Working Income Tax Benefit, a refundable tax credit aimed at providing tax relief for low-income Canadians who have jobs and encouraging those who don't to join the workforce, the Canadian Press has reported.

Morneau will deliver the update in the House of Commons at 4 p.m. ET. CBCNews.ca will carry his remarks live.

'Distractions'

Morneau has already tried to shift the focus from "distractions" like his personal finances. Even when announcing he'd divest shares in Morneau Shepell last Thursday, Morneau reminded Canadians the Liberal government has overseen "a really good couple of years."

The Liberals believe the positive economic signs demonstrate the minister has kept his eye on the ball.

"Thisis going to be good news," a senior government officialsaid. "The economy is on fire ... Our plan is working. Why back up now?"

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The Canadian economy is, by many measures, on the up and up.

Unemployment rates have drifted downwards, reaching levels not seen since the months before the Great Recession. The GDP growth rate, a key measure of a country's economic health, has been impressive, with theoverall economy growing by 4.6 per cent in the 12 months leading up to the end of May. The economy hasn'tseen such lofty figures since 2000.

And despite uncertainty around NAFTA negotiations, the TSX has rebounded after a sluggish start to the year. Even industries sensitive to trade talks, like auto parts and railways, have seen shareprices soarsince President Donald Trump's election last November.

The government has said their plan has "invested in people" giving Canadians tools like the child benefit, a "middle-class tax cut" and investments in infrastructure and the results are starting to bear fruit.

Lower deficit gives spending leeway

Department of Finance figures show adeficit of $17.8 billionin the 2016-17 fiscal year,$5 billion less than earlier estimates thanks to higher revenues from a growing economy. (Althoughthat figure is still higher than what was promised by the Liberals during the last federal election.)

"Combining the better starting point ... and updated economic forecasts, the projected deficit for the current fiscal year would be about $10 billion smaller than the $28.5 billion shortfall set out in Budget 2017. If the $3-billion risk cushion is removed, the deficit could be closer to $15 billion," Josh Nye, an economist for RBC Royal Bank, recently wrote in a letter to clients.

Based on current trends,Nye expects the budget shortfall by 2020-21 to come in below $10 billion rather than the $19-billion deficit originally forecast.

Morneau: 'The process we have in our country isn't that I report to journalists'

7 years ago

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Finance minister continues to defend himself on personal finances

"The question is whether the federal government will spend some or all of the room freed up by this stronger-than-expected fiscal position," he said.

More spending planned

Amid the small business revolt over proposed changes, Morneau announced a cut to the small business tax rate, dropping from the current 10.5 per cent to 10 per cent on Jan. 1, 2018, before reaching nineper cent a year later. That policy change will costan estimated $2.9 billion over the next five fiscal years.

The government is also expected to unveil the final details of its national housing strategy sometime this fall the government already earmarked $11 billion over the next 10years for the plan in its last budget and a new proposal could be even more costly.

A more generous child benefit the program already costs the federal treasury some $23 billion a year could further reduce the fiscal room Morneau has with which to manoeuvre.

Nye, for his part, said he thinks the government should unveil a plan to return to a balanced budget, given the considerable strength of the current Canadian economy.

"While it is the case that the debt-to-GDP ratio remains manageable and is set to decline over the projection horizon, deficits as far as the eye can see are a concern when fiscal headwinds from an aging population are intensifying," he said.

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"A [balanced budget] would leave room to respond if the currently enviable trend in Canada's economy deteriorates down the road."

A government source, speaking on background,said, while growth and deficit numbers will be "great," the focus will be on continued investmentand not setting a date to get back to balance.