Canada’s economic update: Freeland to unveil it Tuesday

Canadian Finance Minister Chrystia Freeland will unveil a much-anticipated fall economic update on Tuesday and CTV News confirmed it will include billions of dollars in loans to increase housing supply, as well as tax reforms that targeting short-term rentals, while trying to strike a tone of fiscal restraint.

With the Liberals’ recent focus on finding federal savings and economists warning of an economic slowdown amid high inflation, the annual economic presentation is not expected to be a big spending package or a “mini- budget” like previous Liberal fiscal updates.

Instead, CTV News sources framed Tuesday’s presentation as a “very focused” and “slim” checkpoint on Canada’s finances and the current government’s plans to create jobs and grow the economy.

It is also meant to be a continuation of the Liberals’ current priority of addressing affordability, and reflects the need to make choices about where to spend, said the sources, who offered a non-attribution intel prior to Freeland’s unveiling.

WHAT TO EXPECT?

On Tuesday morning, CTV News confirmed with its sources that the following measures are in the financial document:

• Unlocking $15 billion in 10-year, low-interest loans to build 30,000 more rental housing units across Canada, through the Canada Mortgage Housing Corp. (CMHC);
• Curtailing short-term rentals such as AirBnb and Vrbo properties in 2024 by no longer allowing property owners to claim income tax deductions on rental expenses for their short-stay properties in regions where short-term rental restrictions are enforced;
• A $1-billion housing fund dedicated to affordability, which supports seeing more homes built;
• New mortgage guidance for lenders that will set expectations for homeowners about renewals; and
• An update on previously developed clean technology measures such as the investment tax credit for carbon capture.

BIGGER POLITICAL, ECONOMIC PICTURE

Freeland’s update — including government spending since the spring federal budget, Canada’s overall economic outlook and key financial projections — comes at a difficult political time for the Liberals, with both Trudeau and following Conservative Leader Pierre Poilievre and the general national sentiment of less comfort today. than a year ago.

It is likely that the federal cabinet will look to Tuesday’s “FES” to help change and convince Canadians that the minority Liberals are accurately aligned with their economic concerns and are the best-placed political party to respond to their cost of living constraints.

Although, as Freeland continues to talk about this time to show fiscal restraint, it remains to be seen how much new money the Liberals can responsibly roll out through this update without further exacerbating inflation and hampering the Bank of Canada’s interest rate efforts.

“It’s going to be a tough one for the minister, I have to say… He’s got real problems to deal with here,” said former federal finance minister John Manley, now a senior advisor at Bennett Jones.

“He has to deal, obviously, with housing shortages, pressure from the NDP on a pharmacare program, a lot of spending requests from other ministers. And at the same time, we’re seeing interest rates rise… That means, you’ve got to try and turn back some of the spending. So that’s a tough balancing act. We’ll see if he can get it back.”

It’s possible Freeland looked to a series of policy-based and promised legislative changes, rather than new monetary announcements, in Tuesday’s update as a way to signal to Canadians the federal government’s plans to support them in these times of economic uncertainty, while likely continuing to point to Canada having the lowest debt-to-GDP ratio in the G7.

Before the update, the federal NDP indicated it wanted to see affordable-centric new spending, while the federal Conservatives wanted to see a path back to balanced books, while the forecast performance in Freeland’s afternoon is “more than the same inflationary spending, housing photo-ops and promises and glaring deficits.”