Ottawa loosens fiscal restraints with new spending

Slower economic growth and higher public spending are straining Ottawa’s bottom line, as the Liberal government’s 2023 budget announced billions in new spending on clean technology and an expanded national dental care program.

Finance Minister Chrystia Freeland said her economic plan will position Canada to take advantage of a moment in which the United States and other democratic allies are seeking to green their economies, while reducing their supply-chain dependence on China and Russia.

After two years of rapid growth as pandemic restrictions loosened, the Canadian economy is expected to stall this year under the weight of higher interest rates. Recent turmoil in the U.S. and European banking sectors has increased the odds of a more severe downturn.

This worsening economic outlook combined with new spending means Ottawa is straying from its “fiscal anchor.” Federal government debt compared with the size of the economy is expected to rise in the coming fiscal year, before returning to a downward trend.

Key takeaways:

• The federal government is banking on a suite of new tax credits, a clean electricity grid and the carbon tax to spur the transition to a clean economy and counter vast subsidies rolled out by the United States that risk pulling capital south of the border.
• Ottawa is establishing an office to counter foreign interference and giving nearly $50-million to the RCMP to combat harassment of Canadians by powers such as China and Russia.

Read more:

• Canada to lend another $2.4-billion to Ukraine
• No funding boost for foreign aid supporting vulnerable women and girls in budget
• Budget targets billions from banks with change to dividend tax

What does it mean for your finances?

• Grading how the federal budget will affect your personal finances
• Federal help with dentist bills costs $7.3-billion more than planned
• Federal government targets high-income earners with increased minimum tax
• Ottawa moves to lower credit card swipe fees for small businesses in 2023 budget
• Ottawa moves to strengthen air passenger rights after ‘unacceptable’ flight delays, airport chaos

Budget commentary

• Andrew Coyne: If the government wanted to strangle economic growth, this is the budget it would produce
• Campbell Clark: The heartbeat of Freeland’s budget is green tech subsidies
• Adam Radwanski: Budget 2023 makes a good, if risky, bet on letting the market drive climate investments
• Editorial: The Trudeau Liberals build a budget on a cloud, and collective amnesia