Federal Finance Minister Chrystia Freeland released Canada’s 2024-25 budget yesterday, revealing how the Trudeau government plans to cover the costs of its new housing, student food and national defence strategies. Despite speculation of a hit at corporations overall and a swipe at the wallets of the wealthy, the only tax increase is an adjustment to the Capital Gains threshold.
New commitments in spending and loan announcements added up to $38B. Freeland committed to keep the deficit to below $40B and keep annual deficits below 1% of GDP in 2026/27 and beyond.
The real political and economic prize would be a decline in interest rates and a slowing down of inflation.
Freeland caught a break when the inflation rate for March came in at 2.9% yesterday, prompting the financial markets to increase confidence in a bank rate cut by June.
Projections:
Deficit/FY: $40B (2023/24) $39.8B (2024/25) $38.9B (2025/26)
Inflation: CPI inflation is expected to decline from 3.9 % in 2023 to 2.5 % in 2024 before slipping to 2% in Q1 2025.
Interest Rates: Short-term rates are expected to decline from an average of 4.8% in 2023 to 4.5% in 2024 and to 3.1% in 2025.
Key Takeaways:
Housing
3.9 million homes by 2031
- $6B infrastructure plan
- $400M for the Housing Accelerator fund
- $15B for an apartment construction loan program
Capital Gains Tax
Capital gains above $250,000 be taxed by 66%.
Lifetime capital gain exemption increased to $1.25N.
Sale of primary residences remains still exempt from capital gains tax.
Carbon Rebate for Small Businesses
Refundable tax credit to over 600,000 small- and medium-sized businesses in provinces with the federal backstop.
School Food Program
$1B over five years for school food program to provide meals to 400,000 children each year.
National Defence
$8 billion in new defence spending in Atlantic Canada over the next 5 years.