Federal surplus hits 13.8 billion $

Sept. 27 2007 10 pm



  Surprise,   surprise! The surplus for the 2006-2007 fiscal year turns out to be a whopping 13.8 billion dollars.

This is only 1 % of the GDP but if it were a deficit it is unlikely that the finance Minister would describe it, as he has,   as relatively modest only 1% of the GDP !

Although in fact from a macro-economic point of view he is
correct.

When we add it to the combined provincial government surpluses   we get a total of 30 billion or more than 2 % of the 1.4 trillion dollar Canadian economy.

Since the government intends to use   all of its surplus to reduce outstanding debt down to 467 billion or 32 % of the GDP the net result will be mildly contractionary on top of the contractionary influence of the dollar at parity and the refusal of the Bank of Canada to lower interest rates.

Unless the Bank changes its direction shortly a slow down in growth or even a recession in Canada in the coming months seems more likely.

Adding this surplus to the 80 billion in previous surpluses over the past ten years and factoring in the certainty that this years results are headed in the same surplus direction Canada will have racked up more than 100 billion dollars in surpluses over the past decade.

A very serious case of bad public policy in light of the neglected infrastructure, excessive cuts in health care, education and social policy and neglect of our armed forces
that has characterized the decade.

The following press release is provided courtesy of the government of Canada.

Backgrounder - 2006-07 Annual Financial Report
27 September 2007
Ottawa, Ontario


This year, Canada’s New Government posted a budgetary surplus of 1.0 per cent of gross domestic product (GDP), or $13.8 billion.   The surplus reflects strong revenue growth and effective management of spending by the Government.   The surplus was $4.6 billion higher than forecast in the March 2007 Budget due largely to stronger-than-expected revenue growth.  

The surplus of $13.8 billion for 2006-07, combined with a gain in other comprehensive income, resulted in a $14.2 billion reduction in the federal debt.   The debt reduction will result in approximately $725 million in ongoing personal tax reductions under the Tax Back Guarantee. Combined with the interest savings and tax relief associated with debt reduction achieved in 2005-06 and planned in 2007-08, this will bring total annual personal tax relief provided under the Guarantee to $1.5 billion.  

The Tax Back Guarantee is a legislated commitment to dedicate all effective interest savings from federal debt reduction each year to ongoing personal income tax relief.   It ensures that Canadians benefit directly from federal debt reduction.

For 2006-07, budgetary revenues were 1.6 per cent higher than forecast, while program expenses were 0.4 per cent lower than forecast.   The Government is committed to managing overall spending to ensure that programs focus on results and value for money, while ensuring they are consistent with Canadians’ priorities.   Public debt charges were 0.5 per cent lower than estimated. Over the past two years, the federal debt has been reduced by an amount equivalent to $1,142 for each Canadian.

Federal debt as a percentage of the economy was 32.3 per cent in 2006–07, less than one half of its peak of 68.4 per cent in 1995–96 and down to its lowest level in 25 years.   In Budget 2007, the Government set an objective of reducing the debt-to-GDP ratio to 25 per cent by 2012-13.   The results for 2006-07 indicate that the government is well placed to exceed that objective.  

The Organization for Economic Co-operation and Development estimates that Canada was the only Group of Seven (G-7) country to post a surplus in 2006.   In addition, Canada’s total government net debt burden is the lowest in the G-7 (this includes debt of federal, provincial-territorial and local governments as well as assets of the Canada Pension Plan and Quebec Pension Plan.)

The financial data in the Annual Financial Report are based on audited results, which will appear in more detail in the Public Accounts of Canada 2007, scheduled for tabling in the House of Commons later this fall.   The Government has received an unqualified audit opinion on its 2006-07 financial statements.

The 2006–07 Annual Financial Report of the Government of Canada is available on the website of the Department of Finance Canada:   http://www.fin.gc.ca