Experts forecast a focused yet restrained 2024 federal budget, emphasizing pharmacare and housing
The federal government's 2024 budget, set to be released on April 16, is anticipated to feature a restrained approach with limited new measures due to stringent fiscal constraints, experts told BNN Bloomberg.
In his report, James Orlando, a senior economist at TD Economics, highlighted that the upcoming budget would mainly focus on the previously announced pharmacare program.
He pointed out that the program's budgetary impact is contingent on its future expansion plans, noting that it currently covers diabetic medication and contraceptives only.
Orlando expressed, “Beyond pharmacare, new budget measures are likely to be scant, with firepower being reserved for next year's pre-election budget.” He further anticipated that the budget would emphasize enhancing housing supply and tackling the cost of living.
However, Orlando clarified that no significant tax reforms are expected to be unveiled, though the government might continue to promote earlier announced changes, including those to the alternative minimum tax.
The pharmacare program stands out in this year's budget deliberations regarding specific areas to watch.
Orlando mentioned in an interview with BNN Bloomberg, “We made note that having universal pharmacare is not likely in this budget, but they're trying to pick away at a few different pieces of the pharmacare landscape in Canada where they can add value.”
On the housing front, Orlando lauded the effectiveness of the GST rebate on purpose-built rental units. This move has spurred a surge in residential construction across Canada.
He speculated on the possibility of the government introducing further incentives to motivate builders to increase the housing supply. However, he admitted, “the government has not telegraphed anything on this.”
Echoing Orlando's cautious outlook, Don Drummond, a professor at Queen's University and former chief economist at TD Bank, forecasted an “election budget” primarily focused on reiterating previously announced programs like the pharmacare bill.
Drummond voiced skepticism about the government's capacity for additional spending without resorting to tax hikes, stating, “I just don't think they have the fiscal wherewithal...I really don't see how they have the latitude or the fiscal room to add yet more spending.”
Regarding fiscal projections, Orlando expects the budget to demonstrate that the government is on track to meet its fiscal targets set in 2023, despite anticipating a $40bn deficit for the 2023-24 fiscal year due to “hotter than previously anticipated program spending.”
This stance contrasts Desjardins' prediction of a $47bn deficit due to an “outsized pace of spending.” Orlando suggested setting the budget deficit at $40bn could provide the government with an additional $5 to $10bn in fiscal space for future years.
On the broader economic front, Drummond pointed to the Bank of Canada's monetary policy report, which indicated that aggregate demand and supply in the economy were “roughly balanced” in late 2023.
He argued that with the current economy, there is no justification for a large deficit to stimulate economic growth.
Drummond highlighted the inconsistency between the government's continued high-deficit spending plans and the Bank of Canada's efforts to maintain a 2 percent inflation rate, noting, “The two are not aligned.”
