The Conference Board of Canada’s Economist Daniel Fields offers the following perspectives/insights on Manitoba's 2018 budget:
“The 2018 Manitoba budget announced a stringent spending plan with the goal of balancing the budget around 2024. According to our projections, if the government can maintain this ambitious spending plan the deficit could be eliminated well ahead of the provincial target.”
—Daniel Fields, Economist, The Conference Board of Canada.
- The 2018 Manitoba budget, released on March 12, focused on reducing a substantial deficit while providing some small tax relief to households and businesses. While the tax relief is significant, households will likely pay more with the introduction of a new carbon tax.
- The government expects a deficit of $521 million in 2018-19, down from $698 last year. To achieve these targets the government still has to come up with $115 million in new revenues or additional savings.
- The 2018 Manitoba budget is based on a real GDP forecast of 2.0 per cent in 2018 and 1.6 per cent in 2019. This is slightly stronger than the Conference Board’s current economic outlook.
- The 2018 budget announced an increase to the basic personal amount as well as increasing the maximum income eligible for the small business deduction (from $450,000 to $500,000).
- The provincial government also announced their intent to lower the Retail Sales Tax by one-percentage point by 2020.
- The cuts to personal and corporate income taxes will be offset by a new carbon tax. At $25 per tonne, the carbon tax will raise the price of gasoline, diesel fuel, natural gas, and propane. The tax – set to come into effect September 1 – will increase the price of gasoline by 5.32 cents per liter and diesel fuel by 6.71 cents per liter. The new carbon tax will also boost revenues by $143 million this year and $248 million per year once fully phased in. This year, most of that funding will be set aside for a conservation trust fund.
- Overall, the budget projects revenues to grow by 2.2 per cent between 2018–19 and 2020–21 as carbon taxes and increased transfers offset new tax cuts.
- We expect that there may be some upside risk to these numbers. Our own forecast includes a stronger outlook for total revenues based on higher equalization payments, the result of strong economic growth in Ontario and the phasing out of equalization payments to that province.
- The big story in Budget 2018 is the province’s spending plan. To shrink its deficit and appease credit agencies, the province released a plan that will limit program spending to just 1.5 per cent between 2018–19 and 2020–21. If achieved, this will be the most significant spending restraint seen in the province in over 20 years.
- The province intends to slowly reduce its deficit and balance its books by the end of a potential second-term in 2024. However, according to Conference Board projections, if the government can maintain their ambitious spending plan, the deficit could be eliminated well ahead of the provincial target.
- Net debt is slated to rise to $25 billion next year up from $22.7 billion in 2016-17. Net debt has more than doubled since 2006–07.
- Overall, after nearly a decade in the red, the province looks to be on a path to balance if ambitious spending targets can be achieved.