Canada’s deficit soars by $5 billion due to falling commodity prices, tax revenues (updated) – by Julian Beltrame (CP/Vancouver Sun – November 14, 2012)

Deficit to hit $26 billion as balanced budget target pushed back a year to 2016-17

The Harper government has pushed back its target date for eliminating the deficit by one year, leaving open the possibility it won’t be able to fulfil two key election promises on income splitting and doubling tax-free saving accounts.

Finance Minister Jim Flaherty delivered his fall economic update Tuesday, saying global economic weakness has carved into commodity prices and tax revenues. The update showed a bottom line worse than many expected, with the deficit at $26 billion, up $5 billion from the March budget forecast.

This year’s deficit would be even higher, by about $7 billion, if Flaherty hadn’t hedged his bet by adding a $3 billion cushion, or margin for risk, into his budget calculations.

Flaherty also said it will take a year longer than predicted to balance the budget. During the last election campaign, the Conservatives said they would establish the Family Tax Cut income sharing for couples with dependent children under 18 years of age. It would give spouses the choice to share up to $50,000 of their household income for federal income tax purposes.

The Conservatives promised it would be implemented during this term in office when the federal budget is balanced.

But when asked Tuesday about the program’s fate, Flaherty said it will have to wait.

“Any movement on that will have to await a balanced budget,” he said.

The government had also promised to double the contribution to tax-free savings accounts to $10,000 once the budget was balanced.

“Canada has clearly been affected by volatile and falling world commodity prices since the budget in late March,” Flaherty said in a speech to a Fredericton business audience.

“And the forecast of private sector economists is consistent with the view that world commodity prices will remain below the level anticipated at the time of the budget.”

Flaherty said the government remains on track in keeping its costs down. But the numbers show it can’t overcome the lower revenues, which were first noticed in the final accounts of last year’s budget period. They carry on this year and into future years.

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