Federal Budget 2023

The TACT team followed the federal budget unveiling. Here are the key highlights.

Canada's Finance Minister, Chrystia Freeland, presented a budget that focuses on the Liberal priorities of the middle class and the green economy and is responsive to the current economic and geopolitical context.

Budget 2023 presents a mixed portrait of the Canadian economy. On the one hand, our economy has recovered from the pandemic faster than previous downturns and Canada is a leader in the G7. 830,000 more Canadians are employed than at the start of the pandemic with near-record low unemployment.

On the other hand, the "sunny ways" era of government finances is behind us. GDP growth is projected to be only 0.3% this year, although it should return to a more normal pace next year. The government is planning to cut $15 billion in government spending and will implement a process to review the effectiveness of programs.

One of the budget's signature measures is the one-time grocery rebate for the most vulnerable. Eleven million people will be able to receive up to $467 through the Goods and Services Tax (GST) credit. This measure will cost $2.5 billion. The government believes that it will help citizens without fuelling inflation.

Investments in clean electricity are at the heart of the efforts to accelerate the energy transition. The Canada Infrastructure Bank will invest $20 billion in clean energy and green infrastructure. The government will also introduce a 15% refundable tax credit for companies that make investments in this space.

The government had pressure from manufacturing companies to respond to the U.S. Inflation Reduction Act. An important measure announced in Budget 2023 is the introduction of a refundable tax credit equal to 30 per cent of the cost of investments in new machinery and equipment used to manufacture or process key clean technologies, and extract process, or recycle key critical minerals.

The government appears to want to improve the business environment to attract more investment, including outlining a concrete plan to improve the efficiency of the impact assessment for major projects to make them more efficient, as well as a review of carbon pricing. These measures have the potential to appeal to conservative voters as well.

Health care is a significant part of the budget, which includes the agreements with the provinces on health transfers. The government is taking a hands-on approach in an area of provincial jurisdiction, with a number of specific measures and a warning to the provinces that additional funding should not be used to replace their existing investments in health.

The Budget introduces the Canadian Dental Care Plan. This plan will cover dental care for non-insured Canadians with annual family incomes under $90,000. Those with family incomes under $70,000 will not have to pay a co-payment. This announcement solidifies the NDP's support which ensures the government's survival and avoids the need for a short-term election. However, it will inevitably raise questions in Quebec, where there is already dental coverage, albeit limited.

The government took advantage of this budget to confirm its positions on a number of political issues, such as the increase in funding to Ukraine, with an additional loan of $2.4 billion for 2023, or the additional funding of $36 million over three years to facilitate access to abortion.