The Entrails of the Update
There are some interesting if rather subtle differences between the fiscal situation of the federal government as forecast in the last Budget, and that given to us yesterday in the Update.
Not much change to the revenue picture, with 09-10 being a bit better than forecast, and next year being a bit weaker than forecast.
Debt charges are a bit lower than forecast, the result of lower interest rates.
Spending was higher than forecast in 09-10, but will be lower this year (10-11) to the tune of 0.3 percentage points of GDP. It looks as though stimulus ended up being relatively more concentrated in 2009-10 as opposed to 2010-11 – due mainly to the timing of transfers to the provinces to offset HST costs.
The deficit was slightly worse than forecast last year, and will be significantly lower than forecast this fiscal year, but not next.
As we move from this fiscal year (2010-11) to next, the federal budget balance will contract by a full percentage point of GDP, compared to the originally forecast change in the balance of 1.5 percentage points of GDP. That is not a bad thing, though we hardly need a full percentage point of GDP worth of fiscal drag as the economy slows. And let’s not forget that total fiscal drag, counting the provincial “contribution”, will likely come to close to 2 percentage points of GDP.
On the spending side, total EI benefits are now forecast to be $21.1 Billion this year (2010-11), $1.5 Billion less than the 2010 Budget forecast level of $22.6 Billion. EI revenues, meanwhile, are just about as forecast ($17.5 Billion compared to a forecast $17.6 Billion.) Looks like the number of claimants has gone down faster than the government assumed.
| 2010 Budget | ||||
| 2009-10 | 2010-11 | 2011-12 | ||
| In Percent of GDP | ||||
| Revenues | 14.0 | 14.4 | 14.8 | |
| Program Expenses | 15.6 | 15.6 | 14.3 | |
| Debt Charges | 2.0 | 2.0 | 2.1 | |
| Budget Balance | -3.5 | -3.1 | -1.6 | |
| Fall 2010 Update | ||||
| 2009-10 | 2010-11 | 2011-12 | ||
| In Percent of GDP | ||||
| Revenues | 14.3 | 14.4 | 14.6 | |
| Program Expenses | 16.0 | 15.3 | 14.4 | |
| Debt Charges | 1.9 | 1.9 | 2.0 | |
| Budget Balance | -3.6 | -2.8 | -1.8 |