Only 10 days ago, Canada’s new federal budget came down like the clap of doom.
Oil would be at a rock bottom $25 a barrel. Growth would barely stutter along. A hundred billion dollars in deficits loomed as far as the eye could see. The government offered no plan and no pledge to get back to balance, ever. We would all be eating cat food.
OK, the budget was silent on cat food. Still, it ladled out gloom like the cook in a Dickensian poorhouse. “Balanced budgets? You want balanced budgets? Forget it!”
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Of course, all budgets depend on whether you expect the economy to grow. If it doesn’t, government revenues crash and red ink splashes everywhere. But if business picks up, even huge deficits can disappear.
To keep politics out of these crucial growth projections, the Finance Department normally polls private sector economists to reach a consensus on what to expect. Like soothsayers in Ancient Rome, these prophets then slaughter some chickens, examine the entrails and emerge in a puff of smoke to announce the most likely scenario.
In February, they revised their previous forecasts downward, predicting a feeble 1.4 per cent growth for the year.
Wretched as that was, the government said it was still not gloomy enough. Finance Minister Bill Morneau wasn’t going to be swayed by a bunch of starry-eyed optimists. Instead, he slashed the forecast to just one per cent and sliced a cool $40 billion per year off the projected gross domestic product. Buy cat food futures!
The economists moaned about the ballooning debt and tut-tutted about the chances of turning things around with costly stimulus spending.
“The growth restraints on Canada look to be structural in nature,” scolded the Bank of Montreal’s economists in a report on the budget. The problem was “not a short-term cyclical phenomena that can be countered with a quick fiscal boost.”
Worse, said BMO, “an overly aggressive fiscal boost could do lasting damage to Canada’s finances.”
Hold it right there
But that was then. Ten days ago.
Now, behold the new Statistics Canada report. Growth is way up! Across the board! This was not in the script at all. But there it is, in the sparkling prose of StatsCan: “Real gross domestic product rose 0.6 per cent in January, a fourth consecutive monthly increase.”
Real GDP rises in January