The federal government tabled a fall economic statement Monday that calls for more than $20 billion in new spending and explains how last fiscal year’s deficit ballooned to $61.9 billion — but it was Chrystia Freeland’s abrupt resignation as finance minister and her questioning of her own government’s economic policy that sent Canadian politics into a frenzy.
The day was thrown into disarray when Freeland, who was meant to deliver the statement, resigned from Prime Minister Justin Trudeau’s cabinet just as reporters and stakeholders were headed to a media lockup to view the document.
Those in the room were meant to receive the document at 10 a.m. ET. That news embargo was pushed off for hours as officials scrambled to deal with an unprecedented situation.
The document, overseen by Freeland before her resignation, also includes pledges to address U.S. president-elect Donald Trump’s return to the White House.
They include $1.3 billion for a border security package over six years — part of Ottawa’s plan to fend off Trump’s threat of steep tariffs — although the 270-page document doesn’t explain exactly how that money will be spent.
In a letter addressed to Trudeau and posted to social media, Freeland, who has been finance minister since 2020, said she had no choice but to resign after the prime minister approached her Friday about moving her to another cabinet role.
She also took a parting shot at her boss’s handling of the country’s economy, denouncing what she called the government’s “costly political gimmicks” and imploring him to work collaboratively with the country’s premiers to confront Trump tariff threat.
Ottawa blows past deficit promise
Government House leader Karina Gould ended up tabling the fall economic statement in the House of Commons on Monday afternoon.
As expected, the document includes the government’s promised GST holiday, which came into effect Saturday and is expected to cost $1.6 billion.
The document does not include the government’s promise to send $250 cheques to working Canadians. The rebates were to be sent to people who earned up to $150,000 in 2023, but the promise faces opposition from other parties in the House.
Sahir Khan, executive vice president of the University of Ottawa Institute of Fiscal Studies and Democracy, said that apart from the tax holiday, the document doesn’t have a lot of gimmicks.
“It’s actually probably the first time we’ve seen them pivot from a consumption-oriented, wealth redistribution budget to one that’s investment-focused,” he said.
“It’s still borrowing for this. We’re still increasing debt to do this, but there’s been a pivot.”
In her spring Budget 2024 speech, Freeland laid out guideposts she said would demonstrate the government’s continuing commitment to fiscal responsibility. The first was a promise to keep the 2023-24 deficit at or below $40 billion.
The federal government has blown past that benchmark; Monday’s update posts a deficit of nearly $62 billion for last fiscal year. The deficit is projected to dip down to $48.3 billion for this current fiscal year.
The federal government says that’s due to one-time costs, including $16.4 billion related to Indigenous claims playing out in court and $4.7 billion related to the COVID-19 pandemic. The document doesn’t say which claims the government is paying out.
“Definitely a fiscal surprise on the negative side. Nothing Canada can’t deal with, but definitely a surprise,” said Kahn.
Another government promise was to maintain a declining debt-to-GDP ratio. According to the fall economic statement, the government has kept within that guardrail — barely.
The federal debt-to-GDP ratio in 2023-24 was 42.1 per cent and the government now predicts it will decline to 41.9 per cent in fiscal 2024-25.
“But it’s still probably higher than some people would like,” said Kahn.
Today’s fiscal update comes as Canada navigates choppy waters in its most important trading relationship. Trump has threatened to impose a 25 per cent tariff on imports from Canada and Mexico, citing concerns about border security, migrants and illegal drugs. Tariffs at that level could cripple Canada’s economy.
Vague border plan
The fall economic statement signals that the government is willing to spend more on the Canada Border Services Agency, the RCMP, Public Safety Canada and the Communications Security Establishment, but it’s light on details about how that money will be spent.
The government has suggested it will be buying helicopters and drones to strengthen monitoring of the shared border.
Most of the new investments mentioned in the statement are incentives meant to encourage investment in Canada and address what’s been described as Canada’s productivity problem.
The government says it will spend $17.4 billion to extend the accelerated investment incentive — temporary tax changes that allow companies to write off the value of investments immediately.
Khan called the new spending largely business-oriented and growth-oriented.
“Something we really haven’t seen as a matter of focus for this Liberal government,” he said.
Conservative Leader Pierre Poilievre called for the government to hold a confidence vote on the economic update immediately. The House of Commons is scheduled to break tomorrow for the holidays.
“The prime minister has lost control, yet he clings to power,” he said during question period.
