The Conservative government’s third budget, tabled by Finance Minister Jim Flaherty, is extremely frugal in terms of new tax and spending initiatives. Only $1.5 billion worth of new fiscal measures were announced for fiscal year 2008-09. By contrast, the tax cuts (notably to the GST and corporate income tax) announced in last fall’s Economic Statement amounted to $9.4 billion for the 2008-09 fiscal year.
Nevertheless, Mr. Flaherty is walking a fine line given the current weakness in the U.S. economy and consequent risk of a larger slowdown in Canada. The projected budgetary surplus (to be allocated to the debt) is only $2.3 billion in 2008-09 and $1.3 billion for 2009-10. This is a much lower that the $3 billion buffer (or more) we have seen in recent years. If the economy and hence government revenues turn out to be much weaker than expected, the government may have to trim its spending to avoid a budget deficit.
Budget measures that are particularly relevant in Atlantic Canada are highlighted in more detail in this publication.