Thursday, September 27, 2007
Canada has a budget surplus of CA$13.8 billion for the 2006–2007 fiscal year, totaling 1% of Canada’s gross domestic product (GDP), Finance Minister Jim Flaherty announced today. The record surplus was boosted by revenue from government corporations to $14.2 billion, far exceeding the government’s projections of $9.2 billion and surpassing the record set by the previous year’s $13.2 billion surplus.
By federal law, all surplus must be used to pay down Canada’s debt, and is not available for spending. $90 billion in debt payments over the last ten years have reduced its debt to $467 billion or 32.3% of national GDP, its lowest level in a quarter century. The announced debt payment is the largest in Canadian history.
The payment also reduced Canada’s annual interest payments by $725 million, which the government pledged to pass on to taxpayers through tax returns and reduced income taxes. The Conservative’s “Tax Back Guarantee”, proposed in the March budget, promises that money saved on interest payments will be deducted from Canadians’ taxes. The Globe and Mail predicts the tax returns will be 30–40 dollars per taxpayer.
Canada has posted ten consecutive budget surpluses in the last decade. The Canadian economy, the 8th largest in the world, has benefited from rising global demand for its export commodities, particularly oil and copper, as well as record corporate profits. This surplus was further increased by a $700 million drop from expected government spending.
Prime Minister Stephen Harper cautioned that the Canadian economy is still facing “tough times” in its forestry, manufacturing, and some export industries. Critics point out that the Conservative government had said Canadians were overtaxed when they took office, and had vowed to eliminate “surplus surprises”.