Annex 1 – Details of Economic and Fiscal Projections
The average of private sector forecasts has been used as the basis for fiscal planning since 1994 and introduces an element of independence into the Government’s fiscal forecast. This practice has been supported by international organizations such as the International Monetary Fund.
The Department of Finance Canada regularly surveys private sector economists on their views on the outlook for the Canadian economy. The economic forecast presented in this section is based on a survey conducted in September 2017.
The September 2017 survey includes the views of 14 private sector economists:
- BMO Capital Markets,
- Caisse de dépôt et placement du Québec,
- Canadian Federation of Independent Business,
- CIBC World Markets,
- The Conference Board of Canada,
- IHS Global Insight,
- Industrial Alliance Insurance and Financial Services Inc.,
- Laurentian Bank Securities,
- National Bank Financial Markets,
- Royal Bank of Canada,
- TD Bank Financial Group, and
- the University of Toronto (Policy and Economic Analysis Program).
Since the release of Budget 2017, the average private sector outlook has been revised up. Private sector economists now expect real gross domestic product (GDP) growth of 3.1 per cent in 2017 and 2.1 per cent in 2018, higher than the 2.0 per cent forecast in Budget 2017 for both years. Real GDP growth over the remaining years of the forecast is slightly lower than in the Budget 2017 forecast (Table A1.1).
Private sector economists assume West Texas Intermediate (WTI) crude oil prices will rise more gradually than in the Budget 2017 forecast, reaching US$59 per barrel in 2021, compared to US$64 per barrel in Budget 2017.
While the outlook for GDP inflation (the broadest measure of economy-wide price inflation) has been revised up in 2017 compared to the Budget 2017 forecast, it has been revised down somewhat in 2018 onwards reflecting a lower outlook for oil prices.
As a result of these developments, the level of nominal GDP (the broadest measure of the tax base) is higher by $30 billion on average per year over the forecast horizon.
In line with upward revisions to real GDP growth, the economists have revised down their outlook for the unemployment rate by about 0.3 percentage points on average over the forecast horizon. They now expect the unemployment rate to average 6.5 per cent in 2017 and 6.1 per cent in 2022.
The recent increases in the Bank of Canada’s target for the overnight rate have led the private sector economists to revise up the outlook for the 3-month treasury bill rate by 40 basis points per year, on average. As well, the outlook for the 10-year government bond rate is revised slightly up from 2018 onwards, by an average of about 10 basis points per year.
|Real GDP growth|
|2017 Fall Economic Statement||1.5||3.1||2.1||1.6||1.7||1.7||1.8||2.0|
|2017 Fall Economic Statement||0.6||2.4||1.8||1.8||2.0||1.9||1.9||2.0|
|Nominal GDP growth|
|2017 Fall Economic Statement||2.1||5.5||4.0||3.4||3.7||3.6||3.8||4.1|
|Nominal GDP level (billions of dollars)|
|2017 Fall Economic Statement||2,028||2,140||2,226||2,302||2,388||2,473||2,568|
|Difference between Budget 2016 and 2017 Fall Economic Statement||-5||13||8||-8||-16||–||–||–|
|Difference between Budget 2017 and 2017 Fall Economic Statement||3||30||31||31||31||26||–||30|
|3-month treasury bill rate|
|2017 Fall Economic Statement||0.5||0.8||1.5||2.0||2.3||2.5||2.7||1.8|
|10-year government bond rate|
|2017 Fall Economic Statement||1.3||1.8||2.5||2.9||3.1||3.3||3.5||2.7|
|Exchange rate (US cents/C$)|
|2017 Fall Economic Statement||75.5||77.8||81.3||81.2||81.4||81.2||82.4||80.6|
|2017 Fall Economic Statement||7.0||6.5||6.3||6.3||6.4||6.3||6.1||6.3|
|Consumer Price Index inflation|
|2017 Fall Economic Statement||1.4||1.6||1.9||1.9||1.9||1.9||2.0||1.8|
|U.S. real GDP growth|
|2017 Fall Economic Statement||1.5||2.2||2.3||1.9||1.9||1.9||1.9||2.0|
|WTI crude oil price ($US per barrel)|
|2017 Fall Economic Statement||43||50||53||54||56||59||62||54|
The remainder of this annex reviews the major economic and fiscal developments since Budget 2017 and updates the Government’s fiscal projections for the 2017–18 to 2022–23 period. Changes in the fiscal outlook since Budget 2017 are shown in Table A1.2.
|2016– 2017||2017– 2018||2018– 2019||2019– 2020||2020– 2021||2021– 2022||2022– 2023|
|Budget 2017 budgetary balance1, 2||-23.0||-28.5||-27.4||-23.4||-21.7||-18.8||n/a|
|Adjustment for risk from Budget 2017||3.0||3.0||3.0||3.0||3.0|
|Budget 2017 budgetary balance
(without forecast adjustment)
|Economic and fiscal developments||5.3||8.9||10.4||9.7||8.9||8.7|
|Revised budgetary balance before policy actions and investments||-17.8||-16.6||-14.0||-10.7||-9.8||-7.1||-5.2|
|Policy actions since Budget 20173|
|Investing in critical services for Canadians||-0.7||-0.6||-0.6||-0.8||-1.1||-1.5|
|Actions to lower taxes for small business and achieve greater tax fairness||0.1||0.1||-0.5||-0.6||-0.4||-0.4|
|Other policy actions since Budget 2017||-1.3||-0.6||-1.0||-0.7||-0.5||-0.4|
|Investments in this Fall Economic Statement|
|Working Income Tax Benefit enhancement||-0.1||-0.5||-0.5||-0.5||-0.5|
|Earlier indexation of the Canada Child Benefit||-0.4||-1.1||-1.3||-1.4||-1.4|
|Total policy actions and investments||-1.8||-1.6||-3.7||-4.0||-3.8||-4.2|
|Budgetary balance (without risk adjustment)||-17.8||-18.4||-15.6||-14.3||-13.8||-10.9||-9.5|
|Adjustment for risk||-1.5||-3.0||-3.0||-3.0||-3.0||-3.0|
|Final budgetary balance||-17.8||-19.9||-18.6||-17.3||-16.8||-13.9||-12.5|
|Economic and fiscal developments by component:|
|Employment Insurance premiums||-0.2||-0.2||-0.4||-0.7||-0.8||-0.9|
|Major transfers to persons||0.3||0.7||0.7||1.0||0.8||0.6|
|Major transfers to other levels of government||0.1||-0.2||-1.1||-1.6||-1.8||-2.0|
|Direct program expenses||3.4||1.9||3.6||4.7||4.0||4.8|
|Public debt charges||0.1||0.6||-0.3||-0.4||0.2||1.4|
|Total economic and fiscal developments||5.3||8.9||10.4||9.7||8.9||8.7|
Impact of Economic and Fiscal Developments
Relative to Budget 2017, projected budgetary revenues are higher over the forecast horizon due to higher projected corporate and personal income tax revenues as well as excise taxes and duties. This improvement reflects the overall improvement in the economic outlook, particularly in the corporate sector, as well as the carry-forward of better-than-expected results in 2016–17.
Employment Insurance (EI) premium revenues are lower over the forecast horizon due to lower projected EI benefits as a result of the stronger economy, which leads to a decrease in the projected premium rate to $1.65 per $100 of insurable earnings (from $1.68 in Budget 2017).
Other revenues, such as those resulting from loans and investments, interest and penalties, Crown corporations’ revenues and assets held in the Exchange Fund Account, are lower in all years of the forecast horizon largely as a result of a downward revision to the projected revenue from consolidated Crown corporations (particularly the Canadian Commercial Corporation), which more than offsets improvements due to higher interest rates.
With respect to expenses, major transfers to persons are projected to be lower throughout the forecast horizon compared to Budget 2017, as the improved economic outlook leads to lower projected EI benefit expenses, and a small decrease in the expected number of recipients leads to lower projected Old Age Security benefit expenses.
Major transfers to other levels of government are higher than Budget 2017 projections due to the improved outlook for nominal GDP growth, to which the Canada Health Transfer and Equalization are pegged. In addition, home care and mental health transfers announced in Budget 2017 are now classified as major transfers to other levels of government rather than direct program expenses. While the value of these transfers is unchanged from Budget 2017, the reclassification leads to an increase in major transfers to other levels of government and a corresponding decrease to direct program expenses.
The Government of Canada provides significant financial support to provincial and territorial governments on an ongoing basis to assist them in providing important programs and services for Canadians.
Growth in the two largest transfers to other levels of government, the Canada Health Transfer and Equalization, is linked to a three-year moving average of nominal GDP growth. As a result of the improved outlook for nominal GDP, other governments are projected to receive an additional $1.2 billion over five years under the Canada Health Transfer and $0.6 billion over five years in Equalization payments relative to the Budget 2017 projections.
Compared to Budget 2017, direct program expenses are lower, reflecting the carry-forward of 2016–17 results (notably lower bad debt expenses on tax receivables) and lower projected expenses for consolidated Crown corporations (particularly the Canadian Commercial Corporation). In addition, expenses related to pensions and employee future benefits are down, reflecting the actuarial gain on plan liabilities as a result of higher interest rates and the recent performance of plan assets.
Public debt charges are expected to be lower in 2017–18 as lower projected inflation results in lower expected Real Return Bond adjustments. Public debt charges are higher in 2018–19 and 2019–20 due to higher projected interest rates, but from 2020–21 onwards, the expected improvement in the federal debt stemming from significantly smaller deficits more than offsets the impact of projected rate increases.
The Government’s accumulated benefit obligations for public sector pensions and other employee and veteran future benefits, as well as the cost of benefits earned by employees during the year, are accounted for based on their estimated present, or discounted, value.
The Government’s funded pension benefits relate mainly to benefits earned post-March 31, 2000 (the time at which the Government began funding certain plans on a go-forward basis) under its three main pension plans―the public service, Canadian Forces–Regular Force, and Royal Canadian Mounted Police (RCMP) pension plans. The discount rate for these funded pension benefits is based on the expected rates of return on invested funds. For unfunded benefits earned up to March 31, 2000 under the three plans, the discount rate is based on a weighted average of long-term Government of Canada bond rates. For the Government’s other future benefit plans, including veterans benefits, health and dental care benefits for retired employees, sick leave, severance and workers’ compensation, the discount rate reflects the expected long-term Government of Canada bond rate. A decrease in discount rates results in a higher present value of the Government’s obligations for pension and other future benefits, while an increase results in a lower present value.
The Government is currently reviewing its discount rate methodology to assess the continued appropriateness of its practices and assumptions. This project includes a review of industry practices, trends in the public and private sectors, and emerging developments in accounting standards. The Government expects to complete its review in the coming months and will publicly share the results on or before tabling of the Public Accounts of Canada 2018.
Policy Actions Taken Since Budget 2017
Investing in Critical Services for Canadians
Since Budget 2017, the Government has made significant investments in order to ensure an adequate level of mission-critical services to Canadians, and address critical health and safety needs. New investments total approximately $5.2 billion over six years, on a net basis, starting in 2017–18—and include:
Funding to Maintain Core Fisheries and Oceans Canada and Canadian Coast Guard Services
Fisheries and Oceans Canada and the Canadian Coast Guard deliver services that support the health, safety and security of our aquatic ecosystems, while providing for sustainable economic growth in the marine and fisheries sectors.
To maintain these mission-critical services to Canadians, funding of $1,240 million over six years, starting in 2017–18, and $353 million per year on an ongoing basis, has been provided to Fisheries and Oceans Canada and the Canadian Coast Guard. This funding will support fisheries management activities, and the maintenance of the fleet and other critical infrastructure, which are essential to fostering economic prosperity and providing for the continued safety and security of Canadian waters.
Increasing Capacity for Status of Women Canada
Status of Women Canada is a federal government agency that promotes equality between women and men in all aspects of Canadian life. The agency works to promote and advance equality for women and girls with a focus on: improving women’s and girls’ economic security and prosperity; ending violence against women and girls; and supporting the advancement and increased representation of women and girls in leadership and decision making roles.
Funding of $41 million over six years, starting in 2017–18, and $8 million per year ongoing, is being provided to Status of Women Canada to help advance the Government’s gender equality objectives.
Protecting Canada’s Missions and People Abroad
Our cadre of federal workers abroad serve as Canada’s face and voice around the world, and their work is critical to the success of Canada’s international goals—providing services for Canadians abroad, forging new export and business opportunities for Canadian firms, engaging with the international community, and helping those in need. Yet working abroad carries risks, especially in an increasingly dangerous and volatile global security environment.
To ensure the Government is fulfilling its duty of care obligations, funding of $760 million over six years, starting in 2017–18, and $127 million per year ongoing, is provided to Global Affairs Canada to ensure that our network of people and missions abroad can do their work in safety and security.
Supporting RCMP Front-Line Operations
The RCMP works to prevent and investigate crime; maintain peace and order; enforce laws; and contribute to the safety of Canadians and Canada. In this context, funding of $100 million over three years, starting in 2017–18, was provided to support existing policing operations, including in the areas of national security, serious and organized crime, and financial crime. This funding includes support for the RCMP’s Force Generation, which will help the organization meet demand for new front-line officers, ensuring that they are trained and equipped to maintain public safety. Funding also includes support for the RCMP External Review Committee.
Other Investments in Critical Services for Canadians
Services in other areas, including health care, local governance for First Nations, air transport security and seniors’ benefits, were enhanced as a result of investments since Budget 2017. These investments are highlighted in Table A1.3 below.
Altogether, investments in critical services for Canadians as well as all other investments made since Budget 2017 total approximately $11.4 billion over six years, on a net basis, starting in 2017–18.
|Investing in Critical Services for Canadians|
|Completing Government of Canada Information Technology Projects||50||91||82||74||33||29|
|Funding provided to Shared Services Canada to support mission-critical information technology projects.|
|Enhancing the Delivery of Health Canada’s Core Regulatory Activities||36||35||-||-||-||-|
|Funding provided to Health Canada to support core regulatory operations related to drugs and medical devices. This measure will enhance Health Canada's capacity to conduct scientific, efficacy and safety reviews related to pharmaceuticals and medical devices.|
|Funding to Maintain Core Fisheries and Oceans Canada and Canadian Coast Guard Services||154||197||240||248||258||269|
|Less: funds sourced from departmental resources||-16||-20||-22||-22||-22||-22|
|Funding provided to Fisheries and Oceans Canada and the Canadian Coast Guard to maintain the fleet, navigational aids and communications equipment, as well as for training and equipment for Canadian Coast Guard personnel, upgrades to information networks and radio infrastructure, monitoring of fish stocks and icebreaking.|
|Improving Delivery of Benefits for Seniors||51||48||24||-||-||-|
|Funding provided to Service Canada to ensure that Canadians continue to receive timely and accurate Old Age Security benefits.|
|Improving Employee Pay||93||6||6||6||6||6|
|Funding to address critical challenges with the Government of Canada's pay system, including a one-time enhanced pay package to attract additional and retain current compensation advisors.|
|Increasing Capacity for Status of Women Canada||4||7||8||8||8||8|
|Funding provided to help support the Minister of Status of Women’s broad mandate and significant involvement in cross-cutting and overarching Government of Canada priorities. This will support the Minister of Status of Women to fulfill her mandate to advance gender equality.|
|Investments in Federal Infrastructure||-||-||-||-||4||8|
|Funding for Public Services and Procurement Canada to undertake major renovations to the Arthur Meighen Building in Toronto and Place du Portage Phase III in Gatineau to replace key building systems and upgrade the buildings to modern and efficient standards.|
|Labour Standards Backlog||1||2||-||-||-||-|
|Funding provided to Employment and Social Development Canada to address a backlog of approximately 2,000 labour standards complaints related to issues such as non-payment of wages and unjust dismissals in federally regulated industries.|
|Maintaining the Security of Government of Canada IT Networks||23||47||51||52||52||52|
|Funding provided to Shared Services Canada and the Communications Security Establishment for cyber security initiatives. This will ensure the Government can better defend its networks from cyber threats, malicious software and unauthorized access.|
|Operating Funding for the Canadian Air Transport Security Authority||25||-||-||-||-||-|
|Funding provided to the Canadian Air Transport Security Authority to support increased domestic and international passenger travel for Canada 150 celebrations and to reduce wait times for air travellers across major Canadian airports.|
|Protecting Canada’s Missions and People Abroad||106||127||156||142||111||118|
|Funding provided to Global Affairs Canada to enhance security at Canada's international network of missions. This will enable the Government to continue to fulfill its core responsibilities, ensuring the safety and security of our government employees abroad.|
|Supporting Canada’s International Engagement||13||13||13||13||13||13|
|Funding provided to Global Affairs Canada to support Canada’s international engagement work, including Canada’s participation in the Organization for Security and Co-operation in Europe, and efforts at the United Nations. This will support Canada's role in addressing major conflicts and crises around the world.|
|Supporting Local First Nations Governance||24||24||-||-||-||-|
|Funding provided to Indigenous and Northern Affairs Canada to provide additional support to local First Nations governance. This will help to support the cost of local governance and the administration of departmental programs.|
|Supporting RCMP Front-Line Operations||94||3||3||-||-||-|
|Funding provided to the RCMP for the delivery of policing operations and for the RCMP External Review Committee to address its growing caseload.|
|Provision for Future Investments in Critical Programs and Services||-||-||-||300||600||1,000|
|Ensuring that Canadians continue to receive the important programs and services they need is a core responsibility of government. In this spirit, the Fall Economic Statement establishes a fiscal provision in order to continue to address mission-critical program and service requirements.|
|Net Fiscal Impact—Investing in Critical Services for Canadians||657||580||561||820||1,061||1,480|
|Other Policy Actions Since Budget 2017|
|2017 Invictus Games||8||-||-||-||-||-|
|Funding provided to Veterans Affairs Canada to support the 2017 Invictus Games, which were hosted by Toronto from September 23 to 30. The Invictus Games, which are an international sporting event for wounded, injured and sick service personnel, brought together more than 550 competitors from 17 nations for eight days of successful competition.|
|Addressing Extraordinary Health Costs in Manitoba||5||-||-||-||-||-|
|Funding provided to the Government of Manitoba to address extraordinary health costs, including ongoing efforts to respond to the opioid crisis and increased demand for medical transportation and dialysis.|
|Advancing Justice for the LGBTQ2 Community||-||2||2||0||0||-|
|Funding provided to Public Safety Canada to implement an expungement scheme for Canadians previously convicted of consensual sexual activity with same-sex partners. This will allow for the permanent destruction of criminal records.|
|Connecting Pikangikum First Nation to Ontario’s Power Grid||30||30||-||-||-||-|
|Less: funds sourced from departmental resources||-||-||-1||-1||-1||-1|
|Less: funds existing in the fiscal framework||-||-2||-||-||-||-|
|Funding provided to Wataynikaneyap Power to build a 117-kilometre power line with associated infrastructure from Red Lake into the local distribution system at Pikangikum First Nation. The power line will eliminate Pikangikum’s dependence on diesel fuel by supporting a transition to more sustainable energy solutions.|
|Defence Policy Review||133||-184||20||-104||-207||-40|
|Fiscal impact of Canada's new defence policy: Strong, Secure, Engaged. This long-term commitment will provide the Canadian Armed Forces with the resources required to meet Canada's defence needs at home and abroad.|
|Enhancing Canada’s National Security Framework||2||19||26||26||25||22|
|Less: funds sourced from departmental resources||-||-8||-7||-5||-5||-5|
|Less: funds existing in the fiscal framework||-||-||-||-2||-2||-2|
|Funding provided to establish the National Security and Intelligence Review Agency, to create a quasi-judicial oversight body for specific intelligence activities, support the Government’s 6-point commitment to national security transparency, and help implement amendments to the Canadian Security Intelligence Service Act and the Security of Canada Information Sharing Act.|
|Enhancing Transparency in Political Fundraising||1||0||0||0||0||0|
|Funding provided to support greater access by Canadians to information on political fundraising and to enhance the transparency of fundraising activities.|
|Ensuring the Continued Integrity of Canada’s Federal Courts||4||-||-||-||-||-|
|Funding provided to the Courts Administration Service to help ensure the smooth functioning of the Courts and to promote greater access to justice for all Canadians.|
|Federal Action to Support the Canadian Forest Sector||53||122||87||0||-||-|
|Less: projected revenues||-||-4||-11||-12||-12||-13|
|Funding provided to Natural Resources Canada and Employment and Social Development Canada to implement measures under the Softwood Lumber Action Plan. This funding will support the companies, workers and communities that depend on the softwood lumber industry.|
|Freight Rail 2030||-||2||2||2||2||2|
|Funding provided to the Canadian Transportation Agency to implement legislative and regulatory changes related to Canada’s freight rail system. These changes will help support rail customers and deliver continued investments in the freight rail system to help it be more competitive and efficient in the long term.|
|Helping Those Affected by the British Columbia Wildfires||50||-||-||-||-||-|
|Funding provided to the Canadian Red Cross to provide emergency lodging, clean-up assistance and financial assistance to thousands of families and local businesses.|
|Investing in Canada Plan||30||258||301||282||252||233|
|Less: funds existing in the fiscal framework||-||-258||-301||-282||-252||-264|
|Support for the Ottawa Light Rail Transit Stage 2 Project, the Toronto Port Lands project and other infrastructure measures receiving funding announced in Budget 2017.|
|Modernizing the Canada-Israel Free Trade Agreement||1||3||3||3||3||3|
|A modernized Canada-Israel Free Trade Agreement provides Canadian exporters with new market access and further strengthens Canada's bilateral commercial relationship with Israel. This measure accounts for estimated foregone tariff revenues under this agreement.|
|New Legal Framework to Strictly Regulate and Restrict Access to Cannabis||59||98||118||128||143||-|
|Less: funds sourced from departmental resources||-2||-2||-2||-2||-2||-|
|Less: funds existing in the fiscal framework||-2||-5||-1||-1||-1||-|
|Funding provided to Health Canada, the RCMP, the Canada Border Services Agency and Public Safety Canada to ensure there is appropriate capacity to license, inspect and enforce all aspects of the proposed Cannabis Act and to undertake robust public education and awareness activities. The implementation of a cost recovery scheme under the proposed Cannabis Act will reduce the overall fiscal profile of this initiative.|
|Phase I Improvement to Access To Information||2||3||3||3||3||3|
|Less: funds existing in the fiscal framework||-1||-||-||-||-||-|
|Funding for Phase I of the plan to achieve the Government’s commitment to improve access to information to ensure greater transparency for Canadians.|
|Providing Health Care to Refugees and Asylum Seekers||54||90||-||-||-||-|
|Funding provided to Immigration, Refugees and Citizenship Canada for the Interim Federal Health Program, which provides limited, temporary health care coverage to resettled refugees and asylum claimants until they become eligible for provincial or territorial health care coverage.|
|Renewal of Operation ARTEMIS||16||37||21||49||9||-|
|Less: funds sourced from departmental resources||-2||-||-21||-49||-9||-|
|Funding provided for the two-year extension of Operation ARTEMIS, the Canadian Armed Force's mission to help stop terrorism and to make Middle Eastern waters more secure.|
|Renewal of Operation IMPACT||173||198||-||-||-||-|
|Funding was provided for the two-year renewal of Operation IMPACT, Canada’s military contribution to the Global Coalition against Daesh. This measure reflects Canada's sustained support for the people of Iraq, Syria and the region as well as our commitment to promoting security, stability and peace in the Middle East.|
|Restricting the Use of Administrative Segregation||-||13||14||14||14||14|
|Funding provided to Correctional Service Canada to improve accountability, transparency and oversight of the use of administrative segregation. This funding will help ensure that the rights of at-risk inmates are protected, while maintaining the safety of staff and other inmates.|
|Safe and Secure Canada 150 Celebrations||3||-||-||-||-||-|
|Funding provided to the Parliamentary Protective Service and the RCMP for enhanced security and screening during Canada 150 celebrations.|
|Strengthening and Enforcing Drug-Impaired Driving||21||27||31||31||28||12|
|Funding provided to Public Safety Canada, the RCMP and the Canada Border Services Agency to implement new and stronger laws to punish more severely those who drive while under the influence of drugs, including cannabis.|
|Supporting Creative Leaders Through the Creative Export Strategy||-||25||25||25||25||25|
|Funding provided to Canadian Heritage to implement the Creative Export Strategy. This measure will support creative entrepreneurs in keeping pace with international competitors.|
|Supporting the Rideau Hall Foundation||3||7||-||-||-||-|
|Funding of $3 million to the Rideau Hall Foundation as a legacy gift following Governor General David Johnston’s 7-year term as Canada's 28th Governor General. Privately raised funds by the Foundation over the next 10 years will also be matched by the Government, up to $7 million.|
|Supporting Victims of Quebec Floods||1||-||-||-||-||-|
|Funding provided to the Canadian Red Cross to help thousands of people in need by providing emergency support (such as lodging, food and clothing) and direct financial assistance.|
|Tax Relief for Canadian Forces and RCMP Personnel on International Operational Missions||15||15||15||20||20||25|
|Forgone revenues from amending the Income Tax Act in order to extend the deduction for Canadian Forces personnel and police deployed to international high- and moderate-risk operational missions to those deployed to all operational missions outside Canada, and increase the maximum amount deductible to the maximum rate of pay of a Lieutenant-Colonel (general service officer), effective in 2017 and subsequent years.|
|Transport Canada Funding||3||10||20||24||32||-|
|Less: projected revenues||-||-2||-2||-11||-32||-|
|Funding provided to Transport Canada to fund its modernization plan and the continuation and expansion of the Canadian Ballast Water Program. This will allow the Department to respond to the Government's priorities for a strong transportation sector and the promotion of environmentally responsible transportation.|
|(Net) fiscal impact of non-announced measures2||611||114||707||610||449||377|
|Net Fiscal Impact—Other Policy Actions Since Budget 2017||1,271||611||1,048||747||479||389|
|Actions to lower taxes for small business and achieve greater tax fairness|
|Net fiscal impact of proposed measures to limit income sprinkling using private corporations.|
|Reducing the Small Business Tax Rate to 9 Per Cent||-45||90||685||855||655||675|
|Net cost of proposal to lower the federal small business tax rate to 10 per cent, effective January 1, 2018, and 9 per cent effective January 1, 2019.|
|Net Fiscal Impact—Actions to lower taxes for small business and achieve greater tax fairness||-95||-125||465||625||420||430|
|Net Fiscal Impact—Total Policy Actions Since Budget 2017||1,833||1,065||2,074||2,192||1,961||2,299|
Summary Statement of Transactions
Table A1.4 summarizes the Government’s projected financial position over the forecast horizon. These projections are based on the average private sector forecast for the economy discussed above.
The budgetary balance is expected to show deficits of $19.9 billion in 2017–18 and $18.6 billion in 2018–19. Over the remainder of the forecast horizon, deficits are expected to decline significantly from $17.3 billion in 2019–20 to $12.5 billion in 2022–23. The federal debt-to-GDP ratio is projected to decline gradually over the forecast horizon, reaching 28.5 per cent in 2022–23. This outlook includes new policy actions taken since Budget 2017 and the new tax measures announced in this Fall Economic Statement.
|Public debt charges||24.1||24.2||26.6||28.7||30.2||31.9||32.8|
|Adjustment for risk||-1.5||-3.0||-3.0||-3.0||-3.0||-3.0|
|Final budgetary balance||-17.8||-19.9||-18.6||-17.3||-16.8||-13.9||-12.5|
|Per cent of GDP|
|Public debt charges||1.2||1.1||1.2||1.2||1.3||1.3||1.3|
Outlook for Budgetary Revenues
|2016– 2017||2017– 2018||2018– 2019||2019– 2020||2020– 2021||2021– 2022||2022– 2023|
|Personal income tax||143.7||152.7||161.3||168.4||174.8||182.3||189.5|
|Corporate income tax||42.2||47.1||47.2||47.4||48.4||50.6||52.0|
|Non-resident income tax||7.1||7.8||7.8||8.2||8.4||8.6||8.8|
|Total income tax||193.0||207.6||216.3||224.0||231.6||241.6||250.3|
|Goods and Services Tax||34.4||36.7||37.6||38.6||39.8||41.2||42.7|
|Custom import duties||5.5||5.1||5.2||5.3||5.4||5.5||5.7|
|Other excise taxes/duties||11.5||11.7||11.9||12.0||12.3||12.4||12.4|
|Total excise taxes/duties||51.3||53.6||54.6||55.8||57.5||59.1||60.8|
|Total tax revenues||244.3||261.2||271.0||279.8||289.1||300.7||311.1|
|Employment Insurance premium revenues||22.1||21.0||22.0||22.5||23.3||24.2||25.1|
|Enterprise Crown corporations||5.7||6.0||6.7||7.3||7.8||8.4||8.3|
|Net foreign exchange||2.1||1.9||2.1||2.4||2.7||3.0||3.2|
|Total other revenues||27.1||28.5||30.2||31.0||32.9||34.7||35.0|
|Total budgetary revenues||293.5||310.7||323.1||333.3||345.3||359.6||371.3|
|Per cent of GDP|
|Personal income tax||7.1||7.1||7.2||7.3||7.3||7.4||7.4|
|Corporate income tax||2.1||2.2||2.1||2.1||2.0||2.0||2.0|
|Goods and Services Tax||1.7||1.7||1.7||1.7||1.7||1.7||1.7|
|Total tax revenues||12.0||12.2||12.2||12.2||12.1||12.2||12.1|
|Employment Insurance premium revenues||1.1||1.0||1.0||1.0||1.0||1.0||1.0|
|Total budgetary revenues||14.5||14.5||14.5||14.5||14.5||14.5||14.5|
Table A1.5 sets out the Government’s projection for budgetary revenues. Overall, budgetary revenues are expected to increase by 5.9 per cent in 2017–18, reflecting strong economic growth. Over the remainder of the forecast horizon, revenues are projected to grow at an average annual rate of 3.6 per cent, roughly in line with projected growth in nominal GDP.
Personal income tax revenues—the largest component of budgetary revenues—are projected to increase by $9.0 billion, or 6.3 per cent, to $152.7 billion in 2017–18. The relatively strong growth in 2017–18 reflects an improved economic outlook and the unwinding of the impact of tax planning that held down revenues in 2016–17, whereby high-income individuals recognized additional income in the 2015 tax year and lower income in the 2016 tax year when the new 33 per cent tax rate came into effect. Over the remainder of the projection period, personal income tax revenues are forecast to increase faster than growth in nominal GDP, averaging 4.4 per cent annually, reflecting the progressive nature of the income tax system combined with projected real income gains.
Corporate income tax revenues are projected to increase by $4.9 billion, or 11.7 per cent, to $47.1 billion in 2017–18, largely as a result of higher corporate profits and the associated strength in recent financial results. Over the remainder of the projection period, corporate income tax revenues are projected to grow at an average annual rate of 2.0 per cent, less than the rate of growth in nominal GDP, reflecting the projected outlook for profit growth, anticipated use of loss carry-forwards as well as the reduction of the small business tax rate to 9 per cent.
Non-resident income tax revenues are income taxes paid by non-residents on Canadian-sourced income, notably dividends and interest payments. For 2017–18, non-resident income tax revenues are projected to increase by $0.7 billion, or 9.9 per cent, owing to the expected increase in dividend, investment and interest income of non-residents, given stronger corporate profitability. Over the remainder of the forecast horizon, they are projected to grow at an average annual rate of 2.5 per cent, in line with projected growth in dividends, interest payments and profits.
Goods and Services Tax (GST) revenues are forecast to grow by 6.9 per cent in 2017–18 based on recent financial results and strong projected growth in taxable consumption over the rest of the year. Over the remainder of the projection period, GST revenues are forecast to grow by 3.0 per cent per year on average, based on projected growth in taxable consumption.
Customs import duties are projected to decline by $0.3 billion, or 6.3 per cent, in 2017–18, partly reflecting the introduction of the Canada-European Union Comprehensive Economic and Trade Agreement. Over the remainder of the projection horizon, annual growth in customs import duties is projected to average 2.2 per cent based on the projected growth in imports.
Other excise taxes and duties are projected to increase by $0.2 billion, or 1.9 per cent, to $11.7 billion in 2017–18. Over the remainder of the projection horizon, other excise taxes and duties are expected to grow at an average annual rate of 1.2 per cent based on historical consumption trends.
EI premium revenues are projected to decline by 4.9 per cent in 2017–18 due to a reduction in the EI premium rate to $1.63 per $100 of insurable earnings as a result of the introduction of the seven-year break-even mechanism in 2017. EI premium revenues are then expected to rebound in 2018–19 as the EI premium rate increases to $1.66 per $100 of insurable earnings for 2018 (as recently announced by the Canada Employment Insurance Commission). Over the remainder of the forecast horizon, EI premium revenues are expected to continue on their upward trend based on projected growth in insurable earnings and a projected EI premium rate for 2019 of $1.65 per $100 of insurable earnings resulting from a stronger economic outlook.
Other revenues are made up of three broad components: revenues from consolidated Crown corporations; net income from enterprise Crown corporations; other program revenues from returns on investments, proceeds from the sales of goods and services, and other miscellaneous revenues; and revenues in the Exchange Fund Account.
Enterprise Crown corporation revenues are projected to increase by 5.9 per cent in 2017–18, and grow at an average annual rate of 6.7 per cent over the remainder of the forecast horizon, reflecting the outlooks presented in respective enterprise Crown corporation corporate plans.
|EI premium revenues||22.1||21.0||22.0||22.5||23.3||24.2||25.1|
|EI administration and other expenses2||1.8||1.8||1.7||1.7||1.7||1.7||1.7|
|EI Operating Account annual balance||1.6||-1.8||-0.4||-0.4||-0.5||-0.6||-0.1||0.4|
|EI Operating Account
|Projected premium rate (per $100 of insurable earnings)||1.88||1.63||1.66||1.65||1.65||1.65||1.65||1.65|
The Employment Insurance Operating Account operates within the Consolidated Revenue Fund. As such, EI-related revenues and expenses that are credited and charged to the Account, respectively, in accordance with the Employment Insurance Act, are consolidated with those of the Government, and impact the budgetary balance. For consistency with the EI premium rate, which is set on a calendar-year basis with the objective of having the Account break even over time, the annual and cumulative balances of the Account are also presented on a calendar-year basis.
The EI Operating Account is expected to record an annual deficit of $1.8 billion in 2017, and a deficit of $0.4 billion in 2018, due to a reduction in the EI premium rate as a result of the recently introduced seven-year break-even mechanism. The estimated seven-year break-even rate for 2019 is $1.65 per $100 of insurable earnings, a slight decrease from the recently announced 2018 premium rate of $1.66 per $100 of insurable earnings, reflecting a stronger economic outlook. For fiscal planning purposes, an EI premium rate of $1.65 has been applied from 2019 onwards such that the EI Operating Account achieves cumulative balance by 2025.
Other program revenues are affected by consolidated Crown corporation revenues, interest and exchange rate movements (which affect the Canadian-dollar value of foreign-denominated assets), and flow-through items that give rise to an offsetting expense and therefore do not impact the budgetary balance. These revenues are projected to increase by 6.8 per cent in 2017–18. Over the remainder of the projection period, other program revenues are projected to increase at an average annual rate of only 2.7 per cent, reflecting a reduction in spectrum auction revenues after 2018–19 and the outlooks presented in consolidated Crown corporation corporate plans.
Net foreign exchange revenues, which consist mainly of returns on investments held in the Exchange Fund Account, are volatile and sensitive to fluctuations in foreign exchange rates and foreign interest rates. These revenues are expected to decrease in 2017–18 by 11.4 per cent, due in large part to significant one-time gains on the sale of investments in the Exchange Fund Account in 2016–17, which are not expected to reoccur. Over the remainder of the projection period, net foreign exchange revenues are projected to grow at an average annual rate of 11.3 per cent, reflecting a projected increase in interest rates and the anticipated appreciation in the Canadian dollar by private sector forecasters.
Outlook for Program Expenses
|Major transfers to persons|
|Employment Insurance benefits1||20.7||21.2||21.3||21.8||22.6||23.4||23.9|
|Major transfers to other levels of government|
|Canada Health Transfer||36.1||37.1||38.6||40.3||41.8||43.3||44.9|
|Canada Social Transfer||13.3||13.7||14.2||14.6||15.0||15.5||15.9|
|Territorial Formula Financing||3.6||3.7||3.8||3.8||3.9||4.1||4.2|
|Gas Tax Fund2||2.1||2.1||2.2||2.2||2.2||2.3||2.3|
|Home care and mental health3||0.0||0.3||0.9||1.1||1.3||1.5||1.2|
|Other fiscal arrangements4||-4.3||-4.8||-4.9||-5.2||-5.4||-5.7||-5.9|
|Direct program expenses|
|Total program expenses||287.2||304.9||312.2||319.0||328.9||338.6||347.9|
|Per cent of GDP|
|Major transfers to persons||4.5||4.5||4.4||4.4||4.5||4.5||4.5|
|Major transfers to other levels of government||3.4||3.3||3.3||3.3||3.3||3.3||3.3|
|Direct program expenses||6.3||6.5||6.3||6.1||6.0||5.9||5.7|
|Total program expenses||14.2||14.3||14.0||13.9||13.8||13.7||13.5|
Table A1.6 provides an overview of the projections for program expenses by major component. Program expenses consist of major transfers to persons, major transfers to other levels of government and direct program expenses.
Major transfers to persons are projected to increase from $95.4 billion in 2017–18 to $116.0 billion in 2022–23. Major transfers to persons consist of elderly, EI and children’s benefits.
Elderly benefits, which are comprised of Old Age Security, Guaranteed Income Supplement and Allowance payments to qualifying seniors, are projected to grow from $50.9 billion in 2017–18 to $66.9 billion in 2022–23, or approximately 5.6 per cent per year. The expected increase in elderly benefits is due to projected consumer price inflation, to which benefits are fully indexed, and a projected increase in the population of seniors.
EI benefits are projected to increase by 2.5 per cent to $21.2 billion in 2017–18. This growth is in line with year-to-date results and the growth in average weekly benefits. Over the remainder of the projection period, EI benefits are projected to grow moderately, averaging 2.4 per cent annually as gains in average weekly benefits are largely offset by the expected improvement in the labour market.
Children’s benefits are projected to rise from $23.2 billion in 2017–18 to $25.2 billion in 2022–23, or approximately 1.6 per cent annually, largely reflecting the indexation of benefits beginning in 2018–19.
Major transfers to other levels of government, which include the Canada Health Transfer (CHT), the Canada Social Transfer (CST), Equalization, Territorial Formula Financing and the Gas Tax Fund, among others, are expected to increase over the forecast horizon, from $70.4 billion in 2017–18 to $84.5 billion in 2022–23.
The CHT is projected to grow from $37.1 billion in 2017–18 to $44.9 billion in 2022–23. The CHT grows in line with a three-year moving average of nominal GDP growth, with funding guaranteed to increase by at least 3.0 per cent per year. The CST is legislated to grow at 3.0 per cent per year. Gas Tax Fund payments are indexed at 2.0 per cent per year, with increases applied in $100 million increments. Announced in Budget 2017, home care and mental health transfers in support of provincial and territorial home care and mental health initiatives will grow from $0.3 billion in 2017–18 to $1.2 billion in 2022–23.
Direct program expenses are projected to rise to $139.1 billion in 2017–18 and further to $147.3 billion in 2022–23. Direct program expenses include operating expenses, transfer payments administered by departments and capital amortization.
The projected increase in direct program expenses is driven by an increase in transfer payments administered by departments over the forecast horizon, including transfers to provincial, municipal and Aboriginal governments and post-secondary institutions for investment in infrastructure. The increase in transfer payments also reflects enhancements to the Working Income Tax Benefit. Overall, transfer payments are projected to increase from $47.8 billion in 2017–18 to $50.6 billion in 2022–23.
Operating expenses reflect the cost of doing business for more than 100 government departments and agencies. Operating expenses are projected to increase from $85.7 billion in 2017–18 to $89.3 billion in 2022–23 due in part to measures announced in, and since, Budget 2017 and ordinary growth in operating expenses, mitigated by falling expenses related to pensions and employee future benefits due to the projected rise in long-term interest rates.
Capital amortization is expected to increase from $5.7 billion in 2017–18 to $7.4 billion in 2022–23 as a result of recent and planned investments and upgrades to existing federal capital.
In the Fall Economic Statement of 2016, the Government proposed reforms to the Estimates process including changing the date when the Main Estimates are tabled in order to increase transparency and accountability. Upon the recommendation of the Standing Committee on Government Operations and Estimates, in June 2017, the House of Commons agreed to change its Standing Orders so that the tabling of the Main Estimates for the next two years can take place in April rather than in early March. This will ensure that more budget initiatives can be included in the Main Estimates on which Parliamentarians will vote. To this end, the Government will propose amendments to the Financial Administration Act in an upcoming bill.
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