It’s Budget Day 2024, and the theme for this year is "generational fairness.” While that’s not as exciting a theme as “year of efficiency” or “murder mystery,” it does sound like a nice idea.
Driving the news: This year, the feds tried out a new comms strategy where they openly trumpeted many of the biggest moves in the month leading up to the budget. Over $37 billion in new initiatives for this year’s budget have already been announced, per Global, such as
- A “plan to solve the housing crisis,” including billions of dollars of spending on things like a new housing infrastructure plan, a rental protection fund, and modular housing.
- Canada's first major defence policy update since 2017, which provides the armed forces with an additional $8.1 billion in federal funding over the next five years.
- And $2.4 billion on AI innovation spending, most of which will go to a fund to pay for the computing infrastructure researchers and businesses need to run AI systems.
Why it matters: The feds have a lot of issues to address but don’t have much fiscal wiggle room to do so, pinky-swearing to not exceed the current projected deficit of $40.1 billion. If they can’t do that, the feds might have to start looking at new places for hefty spending cuts.
- If the deficit gets too big, Canada runs the risk of a credit downgrade, which affects everyone as rates banks charge for loans are correlated to Canada’s credit rating.
Zoom out: Canada is one of the few countries with a sovereign triple-A credit rating (a.k.a. the best of the best) from at least two top credit rating agencies, but keeping it is no sure thing. Look at B.C., which was just hit with a downgrade due to debt. Québec could be next.—QH