The Budget in Brief 1995 - 2
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Archived - Opportunity and Challenge

"This is a window of extraordinary opportunity. Thanks to the honest hard work of millions upon millions of Canadians, our economy is now stronger than it has been for years."

Canada is enjoying a period of strong economic growth and job creation.

In the past year, 433,000 jobs have been created.

In 1994, our economic growth was the highest of any G-7 country.

Productivity has surged. Canada's cost competitiveness is at its highest level in more than 40 years.

Our trade surplus is up. Canada's exports have never been higher.

Business confidence is greater than at any time since 1979.

"However, there are two clouds that loom over our country's horizon. One is the uncertainty that some would create over the future of Quebec. The second cloud is the debt and deficit. Dealing with that challenge is our purpose today."

The underlying deficit for this fiscal year, 1994-95, will be $35.3 billion - down $6.7 billion from last year - and $4.4 billion below the target set out in last year's budget. Even with certain one-time restructuring charges related to major reforms contained in the budget, the 1994-95 deficit will be under $38 billion - or about $1.8 billion below the $39.7 billion target.

However, higher than expected interest rates will mean billions of dollars in new debt charges which threaten future deficit targets.

Based on very prudent economic assumptions and including large contingency reserves, direct action is needed to avoid a $5.0 billion shortfall from the 1995-96 deficit target of $32.7 billion - and a $10.6 billion shortfall from the 1996-97 target of 3 per cent of GDP (Gross Domestic Product - the overall size of the economy).

Comparison of the economic assumptions with private sector forecasts

	1995	1996
Real output growth (%)
Budget	3.8	2.5
Private sector average	3.9	2.9
Nominal GDP ($ billions)
Budget	787	821
Private sector average	787	827
91-day Treasury bill rate (%)
Budget	8.5	7.5
Private sector average	7.8	6.9
10-year government bond rate (%)
Budget	9.7	9.0
Private sector average	9.0	8.4

Principles of the budget

"Canadians want their government to spend money and secure savings in ways that make sense, that reflect their values. To do that, it is essential that our effort be guided by clear principles."

• Government must get its own house in order first and focus on cutting spending - not raising taxes.
• The priorities of the country must reflect the needs of the people. Canadians need an economic plan which promotes jobs and growth.
• The third principle is frugality - every dollar counts.
• Finally, we must be fair - among regions and among individual Canadians.

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