Government releases economic statement today as Freeland faces heavy pressure over deficit

The federal government unveils its long-awaited fall economic statement today — putting to rest weeks of speculation about a higher-than-projected deficit and the potential failure of other fiscal "anchors" Ottawa claimed would keep its budget on track.

Just last spring, in her Budget 2024 speech, Finance Minister and Deputy Prime Minister Chrystia Freeland laid out three "fiscal guideposts" she said would demonstrate the government's continuing commitment to fiscal responsibility. The first was a promise to keep the 2023-24 deficit at or below $40.1 billion.

Last week, Freeland would no longer commit to meeting that target.

"I chose my words with care, because it is important to be clear with Canadians. It is important to be clear with capital markets," she said at the time.

The Globe and Mail reported recently that the government has sold its remaining Air Canada shares and that the profit it made could help it keep the deficit in check. Still, most experts seem to believe the federal government will miss its deficit target.

Jock Finlayson, a senior fellow at the Fraser Institute and chief economist for the Independent Contractors and Business Association, said he expects a revised deficit $10 to $15 billion higher than the one projected last spring.

"We've seen a serial slippage in meeting budget targets ever since the worst of the Covid crisis passed," he said.

Another government promise — to keep deficits below one per cent of GDP in 2026-27 and in future years — is also up in the air in the wake of more recent big-ticket federal spending commitments to child care, dental care and pharmacare.

But a senior government official insists the only fiscal guardrail that really matters is a declining debt-to-GDP ratio, which Freeland also promised last spring to maintain. A declining ratio means the federal debt, as a share of the size of the economy itself, continues to go down.

"The other guardrails are important, but that's the one," said the official, who spoke on condition of anonymity because they were not authorized to speak publicly about the update.

Last week, the finance minister said she still expects to meet the 42.1 per cent debt-to-GDP ratio projected for the 2023-24 fiscal year.

"You can't pick and choose fiscal anchors as you go, and renege on a commitment you made only a year ago," said Robert Asselin, senior vice president at the Business Council of Canada.

"The fact of the matter is this government is losing control of public finances and Canadians are noticing."

Today's fiscal update comes as trouble looms for Canada's most important trading relationship. U.S. president-elect Donald Trump has threatened to impose a 25 per cent tariff on imports from Canada and Mexico that could cripple the economy.