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With slowdown on horizon, Freeland and her Liberal colleagues talking more about fiscal prudence

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Finance Minister Chrystia Freeland is expected to present a fall economic update that will strike a balance between more fiscal prudence and helping Canadians with the cost of living crisis, according to Liberal MPs.

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Freeland, who has reportedly told her colleagues any new expenses would be funded by budget cuts in the next budget, is set to present a lower-than-expected deficit thanks to economic growth, but also high inflation which has garnered the government’s coffers with billions.

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With the economy expected to slow down in coming months and interest rates set to rise again, more and more of Freeland’s colleagues are not shying away from talking about fiscal prudence.

“I think it’s important for us to be careful with people’s money and making sure that we’re delivering good services in the most effective way possible,” said Greg Fergus, who serves as Parliamentary Secretary to the Prime Minister and to the President of the Treasury Board.

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“I’m more of a balanced guy,” he added. “So as long as there is a good balance in delivering things that we need to do, if that means some cuts in some places (…), that works for me.”

Charlottetown MP Sean Casey pushed back against suggestions from reporters that the federal government should be reining in its expenses since it “kind of presupposes spending has gone wild” during the pandemic, he said. But he recognized times are changing.

“I think there’s more of an opportunity to be frugal,” he said.

Opposition parties have been pulling Freeland in all directions, with Conservatives urging her to make good on her promise to fund any new expenses with budget cuts and the New Democrats asking her to commit to helping Canadians with the cost of living crisis.

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Winnipeg MP Jim Carr, a former Liberal minister, described the elaboration of this economic statement as a “balancing act” between what is affordable for the government and how to help Canadians with the pressing cost of living crisis.

“Minister Freeland has always shown a sensitivity to where the sweet spot is and I expect that we’ll find out in the economic statement,” he said.

Canada’s public accounts released just last week showcased a budgetary deficit of $90.2 billion in the fiscal year ending on March 31, 2022. That is $23.6 billion less than the forecast for that same period in this spring’s budget, which was set to be $113.8 billion for 2021-2022.

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Yves Giroux, the Parliamentary Budget Officer, said in a recent interview that a lower deficit is due “in part to economic growth, but also in part to inflation which increases revenues.”

His office predicted in its economic outlook last month that the government can expect tens of billions more in additional revenue in the next few years, and assuming it does not announce any new spending, it could expect a balanced budget to be within reach by 2026-2027.

On the other hand, the federal debt is well over a trillion dollars now and rising interest rates mean that the public debt charges are rising as well, and costing billions more per year.

Liberal MP Rachel Bendayan, who also serves as Parliamentary Secretary to the Associate Minister of Finance, told reporters on Wednesday that Freeland’s last budget was “fiscally responsible” and the government is “planning on continuing on that trend.”

Carr said that at the same time, Canadians are feeling the hit of rising prices and want to know what their federal government can do for them, but also what opposition parties are suggesting.

He added he hopes the fall economic statement will spark a debate on “which road to take.”

“I’m a Liberal. I believe that the centre road is the right road to take,” said Carr.

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