May Market Update: Budget 2024 re-upped the Liberal government’s efforts to improve affordability for low- and moderate-income Canadians, with new spending totaling $53 billion earmarked over the five-year horizon ($57 billion including spending since the Fall Economic Statement).
Programs to fast-track the building of new homes and improve affordability were a key focus, with the cost amounting to $8.5 billion. Most of the spending is occurring in the middle years of the forecast horizon.
Details on the national pharmacare program lay the groundwork for a more fulsome program down the road, however spending in this budget is on the low end at $1.5 billion over five years. While the government talked up productivity-enhancing policies ($2.4 billion), largely in A.I. and computer infrastructure, only time will tell if these efforts improve the trajectory of the Canadian economy.
Some may question this notion given the “surprise” increase in the capital gains inclusion rate to two-thirds on capital gains over $250,000 and for all capital gains earned by corporations. As an offset on the business side, the government increased the lifetime capital gains exemption from $1 million to $1.25 million and introduced a new Entrepreneur’s Incentive.
The deficit is expected to ease from $40 billion in FY 2023-24 (1.4% of GDP) to $20 billion in 2028-29 (0.6% of GDP, slightly higher than in the FES). The debt-to-GDP ratio is expected to peak at 42.1% in the current fiscal year, before moving lower over the remainder of the budget forecast.
