As debt falls and the risk of a recession rises, the Federal government is promising to enact a series of measures to make housing more affordable in Canada.
Finance Minister Chrystia Freeland released a Fall Economic Statement on Thursday, detailing the government’s mid-year update to the budget. The updated outlook focused heavily on reducing Canada’s deficit ahead of a pending recession that experts say is likely to hit early next year.
In April, during the 2022 budget announcement, the government projected a $52.8-B deficit for the 2022/2023 fiscal year. That number has now been revised to to $36.4B with the Liberal government projecting a 1.3% debt-to-GDP ratio for the year — even lower than their initial target of 2%.
Thursday’s announcement marked the first federal budget update since April, when the Bank of Canada’s aggressive, inflation-fighting rate hikes were just beginning. At the time, the overnight lending rate sat at 0.5%, but has now jumped up a staggering 325 basis points.
Although the government did not previously forecast a recession, the new economic update now warns of a “mild recession in the first quarter of 2023.”
Ahead of the update, the Liberal government faced criticism for pandemic spending carrying on longer than some deemed necessary. Freeland, however, defended the spending during her remarks on Thursday.
“Thanks to the historic support we provided — and because of the incredible resilience of Canadians — Canada is entering this time of a slowing global economy from a position of fundamental economic strength,” Freeland said. “There are 400,000 more Canadians working today than before the pandemic. Our economy is now 103% the size it was before the pandemic. So far this year, our economic growth has been the strongest in the G7. Stronger than the United States, the United Kingdom, Italy, Germany, France or Japan. And thanks to that enviable economic performance, we are able to provide targeted support to the most vulnerable, while still shrinking our deficit.”
Even still, the economic update is light on spending, noting that “as we emerge from the pandemic, the government is running a tighter fiscal ship.”
Lighter, however, does not mean non-existent, with $6.1B in new spending planned for 2022-2023, which includes funding for a number of previously announced initiatives. The economic update outlines plans to eliminate interest on federal student and apprentice loans, work with credit card companies to lower and regulate transaction fees, and shift the Canada Workers Benefit to be quarterly.
As to be expected, the cost of housing was a large area of focus in Thursday’s announcement, with the government pledging to deliver several pieces of legislation to Parliament that would make good on promised housing-related measures. This included the creation of the new Tax-Free First Home Savings Account, allowing buyers to save up to $40,000 tax-free. The update also affirmed plans to double the First-Time Home Buyers’ Tax Credit, providing up to $1,500 in direct support to buyers.
Freeland re-upped the Liberals’ promise to introduce a Multigenerational Home Renovation Tax Credit that would provide up to $7,500 to support construction of a secondary suite for a family member who is a senior or adult with a disability. And to target speculators, the federal government plans to fully tax profits from the sale of properties held for less than 12 months, beginning in 2023.
“In the months to come, we will be able to invest in the Canadian economy and be there for the Canadians who need it most—because we were prudent in April, and because we are being prudent today,” Freeland said.
The government is also looking to implement a 2% tax on corporate stock buybacks in an attempt to encourage companies to invest in their operations rather than purchasing stocks. This mirrors the 1% buyback tax included in the United States’ Inflation Reduction Act, which President Joe Biden signed into law back in August.
Green investments were also included in the update, with a promise to launch the Canada Growth Fund. Announced as part of the April budget, the $15B plan seeks to increase investment in a net-zero emission economy.
Laura has covered real estate in Toronto, New York City, Miami, and Los Angeles. Before coming to STOREYS as a staff writer, she worked as the Toronto Urbanized Editor for Daily Hive.