Low commodity prices hitting revenues, but Ottawa finances on track: Flaherty

OTTAWA – Finance Minister Jim Flaherty says lower commodity prices are impacting his government’s revenues, but not enough to derail its deficit elimination plans.

The finance minister made the assessment after consulting with private sector economists on Monday morning on the state of the economy.

The new consensus is that the nominal value of the economy will be $21 billion lower than budgeted for this year, and $29 billion lower both next year and the following year.

Flaherty says commodity prices for exports such as oil have been about five per cent lower than expected, impacting corporate profits and wealth creation as well as tax revenues.

According to one economist, that will translate into a $1.8-billion hit for the government this year.

The conclusion is similar to that reached by Parliamentary Budget Officer Kevin Page in a report earlier Monday that estimated the annual nominal gross domestic product of the country would be about $22 billion less than anticipated.

But analysts note that Flaherty took steps to plan for a downward surprise in his March budget, so the government remains on track to balancing the budget in 2015-16.

The minister would not be as definite, repeating language he has used for months that the deficit will be eliminated in the mid-term.

Flaherty says he will issue a revised budget projection when he tables the fall economic update in a couple of weeks.