Economic and Fiscal Assessment Update

Transcription

1 Economic and Fiscal Assessment Update Standing Committee on Finance (FINA) 15 February 11 Kevin Page Parliamentary Budget Officer billions of chained () dollars 1,395 Real and Potential GDP 1,395 1,37 1,35 1,3 1,95 1,7 1,5 Actual PBO potential 3.% 1,37 1,35 1,3 1,95 1,7 1,5 1, 5Q1 Q1 7Q1 8Q1 9Q1 1Q1 1, Source: Office of the PBO; Statistics Canada Slide 1 1

2 Unemployment Rate and Average Hours Worked hours per week per cent Average hours worked (left axis) 33. Unemployment rate (right axis) 33. 5Q1 Q1 7Q1 8Q1 9Q1 1Q Source: Office of the PBO; Statistics Canada Slide percentage points, annual rates Contributions to Real GDP Growth Inventories Net exports Final domestic demand Real GDP PBO monitoring 9 Q 1 Q1 1 Q 1 Q3 1 Q 11 Q Source: Office of the PBO; Statistics Canada Slide 3

3 Private Sector Economic Forecasts Finance Canada Real GDP growth (%) September 1 survey December 1 survey GDP inflation (%) September 1 survey December 1 survey Nominal GDP level ($ billions) September 1 survey 1,18 1,9 1,78 1,88 1,95,39 December 1 survey 1,18 1,93 1,78 1,87 1,959,5 Nominal GDP level -- fiscal planning ($ billions) Update 1 adjustment for risk Fiscal planning assumption (PBO) 1,1 1,83 1,77 1,83 1,95,5 Source: Office of the PBO; Finance Canada Slide Private Sector Economic Forecasts Finance Canada month treasury bill rate (%) September 1 survey December 1 survey year government bond rate (%) September 1 survey December 1 survey Unemployment rate (%) September 1 survey December 1 survey Total CPI inflation (%) September 1 survey December 1 survey Source: Finance Canada Slide 5 3

4 Output Gap per cent of potential GDP 1 Based on Finance Canada December 1 survey Incorporating Government's October 1 risk adjustment Source: Office of the PBO; Statistics Canada Slide - - billions of dollars Nominal GDP Forecasts,3,,1, 9 per cent confidence 7 per cent confidence 5 per cent confidence,3,,1, 1,9 1,8 Finance Canada December 1 survey 1,9 1,8 1,7 1,7 1, 1,5 Incorporating Government's October 1 risk adjustment , 1,5 Source: Office of the PBO; Statistics Canada Slide 7

5 Risks to the Private Sector Forecast External Weaker global growth, particularly in the U.S. Currency Recent appreciation of the Canadian dollar has outpaced commodity prices Currency tensions around the world Sovereign Debt Potential impact on global interest rates Domestic High level of household debt Slide 8 billions of dollars Summary of Fiscal Projections Budgetary revenues Program expenses Public debt charges Total expenses Budgetary balance Federal debt Per cent of GDP Budgetary revenues Program expenses Public debt charges Budgetary balance Federal debt Source: Office of the PBO Slide 9 5

6 Budgetary Balance Outcomes Given Economic Uncertainty and Downside Risks billions of dollars PBO baseline Budgetary surplus Budgetary deficit per cent confidence per cent confidence -7 5 per cent confidence Source: Office of the PBO; Finance Canada Slide 1 Probabilities of Budgetary Balance and Deficit per cent Probability of balance or better (assuming balanced risks) () () () (7) () (3) Probability of deficit (assuming balanced risks) (1) (1) (1) (93) (8) (8) Source: Office of the PBO Slide 11

7 billions of dollars Structural and Cyclical Balance Estimates Budgetary balance Structural balance Cyclical balance Source: Office of the PBO Slide 1 per cent of potential income Structural Balance Source: Office of the PBO Slide 13 7

8 per cent Population Growth and Old Age Dependency Ratio population 5+ / population 15-, per cent 3. Old age dependency ratio (right axis).5 population growth (left axis) Source: PBO (1) Fiscal Sustainability Report; Statistics Canada Slide 1 Fiscal Action Required to Achieve Fiscal Sustainability permanent increase in taxes/reduction in spending, per cent of GDP 8 8 Baseline scenario (annual growth in CHT averages.%) Alternative scenario (annual growth in CHT maintained at %) Immediate 1-year delay -year delay 3-year delay Source: PBO (1) Fiscal Sustainability Report Slide 15 8

9 growth in GDP per hour worked, per cent 3.5 Labour Productivity Growth Source: Office of the PBO; Statistics Canada Slide 1 Additional Material 9

10 Fiscal Projection Process PBO Private sector economic forecasts (e.g. nominal GDP, interest rates, CPI inflation) + PBO economic assumptions (e.g. GDP income and expenditure components) + PBO fiscal assumptions (e.g. effective tax rates) = All of the key components underlying PBO s fiscal projection are publicly available Revenue and expenditure projections Slide 17 Fiscal Projection Process Finance Canada Private sector economic forecasts (e.g. nominal GDP, interest rates, CPI inflation) + Finance Canada s economic assumptions (e.g. GDP income and expenditure components) + Finance Canada s fiscal assumptions (e.g. effective tax rates) = Revenue and expenditure projections Publicly available Privy Council Office has deemed these key assumptions to be a Cabinet confidence Publicly available Slide 18 1

11 Table 1 Nominal GDP Income Shares PBO February 11 Assumptions (Per cent of nominal GDP) Wages, salaries and supplementary labour income Corporation profits before taxes Government business enterprise profits before taxes Interest and miscellaneous investment income Accrued net income of farm operators from farm production Net income of non-farm unincorporated business, including rent Inventory valuation adjustment Taxes less subsidies on factors of production and products Capital consumption allowances Statistical discrepancy Total Source: Office of the Parliamentary Budget Officer; Statistics Canada 11

12 Table Fiscal Outlook PBO February 11 ($ billions) Income taxes Personal income tax Corporate income tax Non-resident income tax Total income tax Excise taxes/duties Goods and Services Tax Custom import duties Other excise taxes/duties Total excise taxes/duties EI premium revenues Other revenues Total budgetary revenues Major transfers to persons Elderly benefits Employment Insurance benefits Children's benefits Total Major transfers to OLG Direct program expenses Public debt charges Total expenses Budgetary balance Other comprehensive income Federal debt Source: Office of the Parliamentary Budget Officer 1