23 Nov

Finance Minister Revises Government’s Economic Outlook


Posted by: John Dunford

Finance Minister Bill Morneau said today that Canada’s budget is deeper in the red than we were told in the 2015 budget as the economy’s performance has disappointed. He also revised down the government’s outlook for the economy over the next year. According to the Minister, the federal books are short roughly $3 billion in the current fiscal year and $3.9 billion in 2016-17, with deficits continuing through 2018-19–a significantly gloomier fiscal picture than was painted by the Conservatives and even by the most recent report of the Parliamentary Budget Committee.

However, a large portion of this worsened outlook is because the Liberals chose to adjust down their forecasts of economic growth to levels well below the downwardly revised levels predicted by private-sector economists, effectively adding a contingency reserve.

This lower growth forecast adds C$1.5 billion to the projected deficit for 2015-16 and $3.0 billion for each of the five years from 2016-17 on.

Without that economic adjustment, the deficits would be $1.5 billion for 2015-16 and $3.0 billion for each of the five years from 2016-17 on. Nevertheless, all of these projections exclude the Liberals’ impending budgetary stimulus initiatives.

When quizzed by reporters, Morneau would not say whether he remained committed to no more than an annual budget deficit of no more than $10 billion over the next three years. He provided no specifics on exactly what the update portends for the upcoming budget—the timing of which was not released—but asserted that the government would stimulate the economy in a prudent manner.


I agree that there are downside risks to the global and Canadian economies. Canada has suffered a severe blow with the dramatic and sustained fall in oil and other commodity prices, the impact of which has not yet been fully felt throughout the economy. Minister Morneau agreed that further reductions in employment and activity in the resource sector are coming in contrast to what the former government and the Bank of Canada have asserted.

Canada’s federal balance sheet is in great shape thanks to years of austerity beginning in the 1990s. Our structural deficit has been obliterated, helped by the secular decline in interest rates. Moreover, our debt-to-GDP ratio is barely above 30%, at the bottom of the Organization for Economic Cooperation and Development (OECD) countries performance. The proposed deficit of $10 billion is only 0.5% of Canadian GDP—an extremely low number by global standards, well-below the level in the U.S. of about 2.4%.

Canada’s economy is in need of fiscal stimulus. The risk is too little, too late—not, an overflow of red ink. The U.S. made of mistake of insufficient government stimulus in the aftermath of the financial crisis. Canada should not make the same mistake now.

We have been hard hit by external forces that have driven down a very important sector of our economy. The hard won gains on the fiscal front give us the bandwidth to now take significant action to reboot economic activity and to improve our productivity and competitiveness over the next decade. We should seize that opportunity, which will no doubt entail running budget deficits in the near term of more than $10 billion.

23 Nov

Oil Slump Puts Canada in C$3B Hole as Trudeau Takes Reins


Posted by: John Dunford

(Bloomberg) — 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.

After a surplus of C$1.9 billion ($1.4 billion) in the last fiscal year, the latest finance department projections are for a C$3 billion deficit in the fiscal year that began in March, followed by deficits of C$3.9 billion in 2016, C$2.4 billion in 2017 and C$1.4 billion in 2018. Canada is on track to run surpluses in 2019 and 2020, according to figures released Friday by Finance Minister Bill Morneau in Ottawa.

The fiscal update includes more conservative revenue assumptions than in the previous government’s April budget to take into account growing risk to the outlook. The projections are also worse than those made by the Liberals in their platform for the Oct. 19election, which included additional measures between 2016 and 2018 worth about C$25 billion.

Friday’s update — which doesn’t reflect any new measures – – suggests Trudeau will need to bring the country deeper into deficit than he had campaigned on, if the Liberals plan to move ahead with new stimulus spending aimed at kick-starting Canada’s stagnant economy.

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. The differing assumptions about revenue, though, inflate the gap between the last budget and Friday’s update by as much as C$3 billion.

Crude — one of Canada’s top exports — has slumped about 47 percent in the past year amid speculation a surplus will persist as the Organization of Petroleum Exporting Countries continues to pump above its quota. Benchmark contracts for West Texas Intermediate dipped below $40 a barrel on the New York Mercantile Exchange this week for the first time since August.

The finance department assumes an average price for WTI of $49 in 2015 and $54 in 2016.

6 Nov

What is a credit report and why is it necessary?


Posted by: John Dunford

What is a credit report and why is it necessary?What is a credit report and why is it necessary? It’s easy, it provides proof of your creditworthiness. Plain and simple!

In this day and age, it’s rare to find someone who doesn’t have some form of credit. This can include credit cards, personal loans, lines of credit, car loans,  student loans, mortgages and more. Anything that reports to one or both of the main credit reporting agencies in Canada, Equifax and TransUnion.

What this basically says is what your credit history and repayment habits are like. It reports when you paid on time, late or didn’t pay at all and you now have a collections company after you. It also reports when a creditor writes off a debt along with when there has been a bankruptcy or a consumer proposal. They also provide information on how well you have made your mortgage payments.

Your credit report will also show how much of your available credit has been utilized. So if the limit on your credit card is $2,000 and you owe $1,999, it gives the impression that you might be tight for funds and are using credit to keep afloat. Having several maxed out and over the limit debts can be a warning sign to credit issuers, along with mortgage lenders.

All this info creates scores which rate your credit worthiness. The higher the score, the better, especially when you are asking to borrow the most money you will probably ever ask to borrow – a mortgage on a house!

We have several categories of lending institutions. The best interest rates and terms are found with prime lending institutions such as the banks, monoline lenders (available through mortgage specialists), credit unions, etc. These options are usually only available to those with the best credit ratings.

There are lenders who will grant mortgages to those who have experienced credit challenges. Rates and terms are higher, often brokerage and lender fees apply. These “subprime” lenders also offer opportunities designed to assist those having difficulties to get out of the corner and improve their situation. Most of the time, these lenders are used in the short term until the borrower qualifies with prime lenders with better rates and terms.

There are circumstances where private lenders are also utilized. A good mortgage specialist will be able to assess the situation and tell you when this is necessary.

Of course, you will be notified well in advance anytime a fee will be charged by the broker or the lender.

Here’s what makes up your credit score and what impact they have on the bottom line. Payment History (how well you paid), Credit Debts (how many debts you have and how much they are utilized), Age of accounts (how long you’ve had these debts, the longer the better), Type of credit (they all impact differently, Credit Enquires, (are you a shopper spending lots of money, or in trouble?).

To find out how long negative comments stay on your credit bureau, check out this page on the Financial Consumer Agency of Canada’s website.

The biggest threats to your credit score are payments later than 30 days, maxed out credit cards, collections, proposals and bankruptcies.

The moral of the story….. Keep a close eye on those debts, keep payments up to date, don’t overextend yourself, and if you are having issues, talk with an advisor before it gets out of hand. There are many ways to prevent a credit rating breakdown, which I can can help you.