Freeland's mini budget waives interest on student loans, sending more money to low-income workers

Ottawa offers $30.6 billion in new spending as it braces for recession next year

Finance Minister Chrystia Freeland submitted her fall economic statement Thursday - a multi-billion dollar plan that calls for more spending even as the economy is on the verge of recession, with interest rates set to move higher.

While Freeland has promised fiscal prudence in this era of very high inflation, the mini-budget proposes a new program to help some of the people hardest hit by rising prices - including students and low-income workers - and to launch what it calls "an industrial policy that is real and strong” to position Canada for future economic growth.

Freeland announced that all federal student and internship loans will be permanently interest-free and launched a multi-billion dollar plan to automatically send Canada Workers Benefit (CWB) payments to eligible persons in the previous tax year.

The document also includes plans to match some of the clean energy incentives recently introduced in the United States through the US Inflation Reduction Act, which the government sees as a threat to future investment in Canada.

The government's current fiscal health is much better than expected thanks to higher oil prices and growth in personal and corporate taxes.

Freeland told the House of Commons Thursday that the improvement in the federal fiscal picture "did not come by chance."

"It's happened because people are struggling through COVID, they are keeping their business, they are continuing to work and operate," he said. "And that's why Canada is in this pretty extraordinary position by significantly outperforming our forecasts in the budget in April."

Freeland's spring budget projects a $52.8 billion deficit for fiscal year 2022-23. Now, the fall economic statement predicts a $36.4 billion deficit.

That's still much higher than the $23 billion deficit Ottawa could have posted had it saved more of the windfall than it allocated to new programs.

Asked whether it was appropriate to spend some of the newfound revenue with the economy in a precarious state, Freeland said the government had "chosen to invest those profits."

The government conjures up two goals, Freeland says: it wants to avoid fueling inflation while also supporting people hard-hit by rising cost of living.

"We need to strike a balance today between, on the one hand, being fiscally responsible, keeping our powder dry, given the uncertainty of the global economy and, on the other hand, being compassionate, providing support to people who need it," Freeland told journalist.

There is a risk that the projected $36.4 billion deficit may never materialize. The deficit could end up much worse — because the economy is faltering.

The government fears the economy could slip into recession next year as the Bank of Canada's aggressive interest rate hikes substantially slow the once-hot economy.

Private sector economists surveyed by Ottawa projected real GDP growth to be just above zero for the next several quarters. That would push Canada's unemployment rate up from 5.2 percent currently to 6.3 percent by the end of next year.

The federal government presented what it called a "downturn scenario" for growth and employment - in which a recession results in thousands of jobs being lost, fewer taxes being collected, a spike in job insurance (EI) payments, an increase in the cost of servicing debt and a much higher deficit: $49, 1 billion by 2022-23.

'Our economy is slowing'

This "downgrade scenario" is not without possibility, the government said. In fact, Freeland's department said Thursday "the balance of risks to the growth outlook is tilted to the downside."

"This is a challenging time for millions of Canadians. It is important for me to be honest with Canadians about the challenges that lie ahead," Freeland said in his speech Thursday.

"Interest rates go up when the central bank steps in to tackle inflation. That means our economy is slowing down."

Conservative leader Pierre Poilievre lashed out at Prime Minister Justin Trudeau over the fiscal paperwork, accusing him of being involved in a "massive money-printing party."

Speaking in the Commons, Poilievre said that federal government spending fuels inflation, driving up the cost of everyday goods. The government maintains the pandemic, supply chain disruptions and war in Ukraine are to blame for rising prices.

Poilievre said Freeland's "inflation scheme", which proposes $6.1 billion more in spending for this fiscal year alone, will only make things worse.

"Insanity is doing the same thing over and over again and expecting different results. Stop the madness, stop inflation," said Poilievre, who declined to answer reporters' questions afterward. This article was written by EDUKASI CAMPUS.

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