Canada uses rising revenues for targeted spending

Significance

The government of Prime Minister Justin Trudeau has previously emphasised spending but, amid high inflation and consequent high interest rates, Freeland stressed the need for restraint, promising a balanced budget within four years. Even so, she has increased assistance to students and Canadians on low incomes who are struggling with the cost of living.

Impacts

• The Conservatives will continue to criticise spending measures in Freeland’s statement but will not repeal them if they win power.
• The Bank of Canada is expected to raise its benchmark interest rate, currently 3.75%, by at least 50 basis points next month.
• Although the government is emphasising restraint, this is unlikely to translate into public sector job cuts in the next two years.
• If elected, a Conservative government would likely take a more stringent approach to the public sector, risking strike disruption.