Joe Oliver says $1.6B surplus takes falling oil prices into account

Finance Minister Joe Oliver says the government is confident it can balance the next federal budget without scaling back on new tax measures and still turn up a small surplus, despite falling oil prices.

Declining oil prices raise questions about elimination of deficit

Finance Minister Joe Oliver says the government will keep its promise to balance the budget. (Adrian Wyld/Canadian Press)

Finance Minister Joe Oliver says the government is confident it can balance the next federal budget without scaling back on new tax measures and still turn up a small surplus, despite falling oil prices.

"I'm proud that our government is on track to achieve a balanced budget in 2015 with an expected surplus of $1.6 billion," Oliver said in Vancouver on Wednesday.

"That projection takes into account falling oil prices."

Oliver's comments come after TD Economics updated its forecast on Tuesday to project a $2.3-billion deficit in 2015-16 followed by a $600-million deficit for 2016-17. Under the new forecast, the government would return to surplus for the fiscal year 2017-18 rather than post a $1.6-billion surplus in 2015-16.

The TD forecast assumes oil prices will average $67.50 US per barrel in 2015 and $80.25 in 2016. The government's projections assume oil prices will average $81 US per barrel for the fiscal year 2015-16.

While Oliver was more optimistic, at least two other ministers said today that falling oil prices will reduce the government's room to manoeuvre. 

In an interview airing Wednesday on CBC News Network's Power & Politics, Treasury President Tony Clement said, "I'm not saying things are going to be the same, there is going to be an impact. 

"It does reduce our flexibility on certain fronts, but we do have a plan and part of that plan is a balanced budget."

Natural Resources Minister Greg Rickford was in Washington, D.C., on Wednesday where he made similar comments.

"Declining oil prices will impact the government's flexibility, but we will balance the budget in 2015."

Oliver did acknowledge that plunging oil prices will "adversely affect" the government's corporate tax revenue.

​Asked if the government would have to scale back on any of its tax promises such as doubling the contribution limit for the tax free savings account, Oliver said the government would deliver on all of its promises.

"The commitments we have made, we will honour," he said. 

TD's new outlook concluded that deficits over the next two years will make it difficult for the government to deliver on promises such as the tax free savings account or the introduction of the adult fitness tax credit.

"In the absence of new measures to raise revenues or cut spending," the report said, "introducing significant new policy measures … in the current fiscal environment will be a challenge."

Oliver said the government would not raise taxes or engage in "reckless new spending."

The TD report noted the government could tap into its $3-billion a year contingency fund to post a slim surplus.

"These expected deficits are less than the federal government’s annual $3 billion set aside for contingencies. As such, surpluses over the next couple of years cannot be ruled out."

Alberta Premier Jim Prentice acknowledged on Tuesday that falling oil prices will have an effect on the province's budget for the next three fiscal years.

While he did disagree with the Conference Board of Canada's assessment that Alberta could slip into a recession, Prentice said he was prepared to discuss the need for a sales tax.


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