Transcript Aspects of Budget

Background to
Budget 2009
Presented by
Dana, Mrinal & Yoori
Aspects of Budget
Budgetary Revenues
• total $242.4B an increase of
$6.5B from last year
• Revenues composed of
personal and corporate taxes,
GST and EI
• Other revenues aside from
taxes are from crown
corporations such as the Bank
of Canada, Export
Development Canada and
Canada Mortgage and
Housing Corporation
Aspects of Budget
Budgetary Expenses
Total $232.8B an increase of 4.8%
consist of transfer to persons (EI, pension, children’s benefits) and to other
government (the Canada Health Transfer, the Canada Social Transfer and
transfers to provinces on behalf of Canada’s cities and communties
• Government operating costs include:
the salaries and benefits of the various
members of government as well as
facilities, travel and equipment costs
• public debt charges which is interest on
debt accounts for 14.3% of expenses
• a major concern is the rising of
transfers to persons especially
pensions because of an aging
population
Aspects of Budget
Budgetary Balance
• Difference between the government’s revenues and
expenses
• Represents the expenses when they are incurred and
revenues when they are earned as opposed to when
cash is paid out
• Alternate measure is the source/requirement balance
which records the cash inflows vs outflows.
• During the past 12 years we have maintained a budget
surplus
• The surplus has decreased from last year partially
because of the reduction in GST
Federal Debt
• The difference between government’s liabilities and
assets
• Total liabilities consist of interest-bearing debt, accounts
payable and accrued liabilities
– Interest-bearing debt includes unmatured debt and
liabilities for pension and other accounts
– Total liabilities $692.3B annual decrease of $17.4B
• Financial assets consist of cash and other accounts
receivables, foreign exchange accounts, loans,
investments and advances.
• Total financial assets $176B a decrease of $5.8B partially
due to debt reduction
Global Market Turmoil
• Liquidity dropped sharply
– increasing cost of borrowing
– reducing supply of loans
– stock markets to tumble
• Less pronounced in Canada
• Impacts on budget: Expenditures
– Gov’t will purchase insured mortgage pools
– supporting long-term credit and protect Canadian
financial institutions
Economic Slowdown
• U.S is experiencing a recession
• Also entering a technical recession
– Euro area
– Japan
– China
• Impacts on budget: Decrease in trade balance
– Slowdown in emerging economies result in
slower export growth
Commodity Prices
• Commodities to drop sharply, particularly energy
• Reduce the level of nominal GDP in 2009 and 2010
• Will reduce the value of goods produced
• Impacts on budget: Decrease trade
balance and increase debt
– Temporary deficit
– A rise in net foreign indebtedness
– Still expected to remain near record
lows
Export Extensive Sectors
• Manufacturing sector declined by 7%
• Forestry-related sectors
– Pulp and paper industry down 16%
– Wood product industry down 30%
• Impacts on budgets: Expenditures
– Job training, community transition plans and
infrastructure investments
– Automotive Innovation Fund to support R&D
Labour Market
• Unemployment rate was 6.6 % (30-year low)
• Not in the same predicament will see the
labour market weaken
• Impacts on budgets: Expenditures
– Projects like roads, transit, and repairs to
colleges, training for laid-off workers
– Provide an increase in permanent jobs
Taxes
• Number of core strengths
– Housing sector is sound
– Canadian financial institutions are sound
– CPI inflation has remained low, stable
– Best fiscal position of all G7 countries
• Impacts on budget: Revenues
– Government to provide permanent tax relief
"We will not run a deficit."
- Jim Flaherty (Oct. 9)
"This country will not go into
recession next year and will
lead the G7 countries."
- Stephen Harper (Oct. 10)
“We need an election in February like a
hole in the head…”
- Michael Ignatieff
“Will it protect the vulnerable? Will it save
jobs? And most importantly, will it create
the jobs of tomorrow?”
- Michael Ignatieff
Canada’s Economic
Stimulus Plan
Six-point Action Plan:
 Stimulate economy: direct government
action and by encouraging private
investment
 Build Canada through new
infrastructure
 Protect stability of financial system
 Ensure access to credit
Support Canadian industries
 Protect the vulnerable
Budget 2009
• Projected $30 billion
deficit this fiscal year
• Another $34 billion
deficit in 2010
• Exit strategy: It will take
five years to return to
balanced budgets
– $100 billion in the red
for five-year period
Budget 2009
•
•
•
•
•
•
•
$7 billion in new infrastructure spending
$2.4 billion for social housing
$1.5 billion to help re-train laid-off workers
$1 billion to help the hardest-hit communities
$160 million on arts and culture
Tax cuts for middle-lower income tax brackets
Regulate credit cards
Canada's federal
debt at the end
of March 1997:
$583 billion
In the last twelve years, federal debt has been
reduced by more than $100 billion to $457 billion
American Recovery &
Reinvestment Plan
“… there are millions of
Americans trying to find work,
even as, all around the country,
there is so much work
to be done.”
- President Barack Obama