INDEPTH: FEDERAL BUDGET 2006
Surplus and Debt
CBC News Online | May 2, 2006
The Conservative government says it expects a budget surplus in each of the next two years, putting Canada on track to record its 10th and 11th consecutive surpluses.
After putting aside $3 billion both this year and next for debt reduction, the government said it expects a surplus of roughly $600 million for the current year and $1.4 billion the following year.
Making those payments will bring the national debt down from $486.4 billon for 2005-06 to a projected $480.4 billion by 2007-08.
In his budget address, Finance Minister Jim Flaherty said Canada's debt-to-GDP ratio is expected to fall from 31.7 per cent in 2007-08 to 25 per cent by 2013-14, one year earlier than previously projected.
Flaherty added that the government will look at allocating any year-end surplus larger than $3 billion to the Canada Pension Plan and the Quebec Pension Plan.
Possible threats
In his budget address, Flaherty noted that rising commodity prices have helped boost the country's economic activity. The level of Canada's gross domestic product is now more than $20 billion higher than projected last fall, he said.
However, the finance minister acknowledged that the government's spending plans are not without possible threats.
"The challenges we need to watch are still mostly external: uncertainty about commodities prices, the risk of a sudden correction in U.S. house prices and the impact of a higher [Canadian] dollar on our manufacturers," he said.
Government eyes some spending cuts
The Conservatives said government spending rose by more than 14 per cent in 2004-05 – a level Flaherty called "neither sustainable nor desirable."
He said the government's aim is to find $1 billion in savings for 2006-07 and 2007-08. Details about the cuts, which could affect government department and agency employees and the programs they offer, are expected by the autumn.
Flaherty said that programs that "no longer serve the purpose for which they were created should be eliminated."
Aided by the growing economy, government spending as a share of GDP is currently projected to fall from 13.7 per cent in 2004-05 to 13 per cent in 2007-08.
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