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Canada Tax Change to Affect Just New Stock Options, Morneau Says

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David Axelrod former strategist for U.S. President Barack Obama speaks at a conference hosted by the Canada 2020 think-tank in Ottawa this week. He carried a message for Liberals governing is much trickier than campaigning

New Finance Minister Bill Morneau delivered a fiscal update this morning, announcing that the federal government is billions of dollars deeper in the hole than expected.

A large portion of this worse outlook is because the Liberals, who defeated the Conservatives in last month's federal election, lowered economic growth forecasts to levels well below the downwardly revised levels predicted by private-sector economists.

During the election campaign, the Liberals vowed to run annual deficits of just under $10 billion over the next two years with a shortfall of about $5.7 billion in the third year.

The Finance Department says the calculations in today's update will not factor in any of the new measures promised by the Liberals.

The economists downgraded the April projections for real gross domestic product - the common measure of economic growth - to an average of 1.9 per cent from 2015 to 2019, down from 2.1 per cent.

The Liberals said they expect the economy to grow 1.2% this year and 2% next year.

The department's figures suggest economic developments since April will result in an erosion of fiscal room of about C$6 billion annually over the next five years from what the previous government projected.

Canada's finances are taking a bigger hit than projected from the oil-price slump, putting the country on pace for red ink even before Prime Minister Justin Trudeau kicks off his plan for deficit spending.

 

The parliamentary budget office updated its fiscal numbers earlier this month after lowering its fiscal outlook due to deteriorating growth, low commodity prices and shrinking revenues.

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