Introduction
In preparing Budget 2024, Deputy Prime Minister and Minister of Finance Chrystia Freeland faced several conflicting objectives, including pressure to invest in housing and national defence and to help Canadians with affordability, while remaining within the fiscal guardrails she established in last fall’s economic update and avoiding refuelling inflation. She also faced a sluggish economy, which began slowing down in mid-2023 as businesses and households continued to adjust to higher borrowing costs, and mortgage borrowing fell to its lowest level in 18 years. The impressive job creation of a year ago has abated, and over the past year, economic growth has been anemic, at one per cent or lower.
Productivity back on the national agenda
Canada is currently ranked 18th in productivity in comparison to other countries. Compared to the United States, Canadian productivity has diminished by nine per cent between 2000 and 2022, falling to roughly 72 per cent of that of the U.S. In a recent speech, Deputy Governor of the Bank of Canada Carolyn Rogers said the need to improve productivity has reached an emergency level and the economy faces a future where inflation may be more of a threat than in the past few decades: “You know those signs that say, ‘In an emergency, break the glass?’ Well, it’s time to break the glass.”
Waiting on lower interest rates
The Bank of Canada (BoC) has held the overnight policy interest rate at five per cent since last July, and while inflation has eased to 2.9 per cent in March 2024, the BoC is still concerned about underlying inflationary pressures, and consumers are desperate to see lower borrowing rates. Following the bank’s most recent rate setting announcement on April 10, Governor Tiff Macklem said that a June rate cut was, “within the realm of possibilities. We’re seeing what we need to see. We just need to see it for longer.”
In late January, he warned both federal and provincial levels of government about new spending in 2024: “If governments were to add more spending on top of what they already planned for this year, it certainly could start getting in the way of trying to bring inflation down to the two per cent target.”
Fiscal guardrails
In last fall’s economic update, Minister Freeland established new fiscal guardrails for future government spending:
- Setting a goal to keep deficits below one per cent of GDP beginning in 2026-27.
- Maintaining the current fiscal year’s deficit at or below the spring budget projection of $40.1 billion.
- Lowering the debt-to-GDP ratio in 2024-25 relative to the projection in the fall economic statement.
In advance of Budget 2024, Minister Freeland vowed to live within these limits: “For our government, it is very important to invest in Canada and Canadians … in a fiscally responsible way. We laid out in the fall economic statement some fiscal guideposts, and we will meet them.”
The budget projects a reduction in the deficit each year, dropping to $20 billion by 2028-29. The deficit is forecast to be 1.3 per cent of GDP in the 2024-25 fiscal year, and projects to drop to 0.6 per cent of GDP over the next five years.
The debt-to-GDP ratio is expected to decrease from 41.9 per cent this year to 39 per cent by 2028-29.
A new approach to budgets…
For generations, budget day in Canada has been a set piece. To honour budget secrecy, a tradition we inherited from the United Kingdom, most of the details of budgets were kept under wraps until the “big reveal” – the reading of the budget address by the finance minister. The result is that the user-friendly initiatives designed to appeal to voters were submerged in hundreds of pages of dense prose and detailed charts on economic forecasts, growth projections, international economic comparisons and deficit and debt numbers. This process lost the real audience – the people of Canada – because most budgets sink like a stone as a political communications device and disappear from broadcast, print and social media within 48 hours.
… and the launch of a new agenda
This year, the Liberals abandoned the old budget model and changed the traditional budget pre-game show. For the last three weeks, the prime Minister, deputy prime minister and Housing Minister Sean Fraser, have travelled the country announcing specific housing and affordability measures, and outlining a new and improved government agenda. As the Prime Minister told CBC’s The Current on April 4, this new agenda centres on “the far too many young people, particularly millennials and Gen Z, (who) feel that the system doesn’t work for them anymore.”
Not surprisingly, these are the same voters who have recently been abandoning the Liberals for the Conservatives. A surge in the millennial vote was widely credited with helping the Liberals win the 2015 federal election. But last month, an Abacus Data poll found that 41 per cent of 30-44 year-olds would vote Conservative if an election were held tomorrow, compared to 20 per cent Liberal. For 18-to-29 year-olds, 34 per cent said they would vote Conservative, compared to 21 per cent leaning Liberal.
Fiscal targets
The budget projects a reduction in the deficit each year, dropping to $20 billion by 2028-29. The deficit is forecast to be 1.3 per cent of GDP in the 2024-25 fiscal year, and projects to drop to 0.6 per cent of GDP over the next five years.
The debt-to-GDP ratio is expected to decrease from 41.9 per cent this year to 39 per cent by 2028-29.
- The budget maintains the 2023-24 deficit at or below the Budget 2023 projection of $40.1 billion.
- Budget 2024 lowers the debt-to-GDP ratio in 2024-25, relative to the 2023 Fall Economic Statement, and keeps it on a declining track thereafter.
- It maintains a declining deficit-to-GDP ratio in 2024-25 and keeps deficits below one per cent in 2026-27 and future years.
By the numbers
New measures announced in the budget
Research + development measures
In 2023, the Advisory Panel of the Federal Research System’s Bouchard Report made recommendations on how to modernize federal support for academic research, as well as on the governance structures of granting councils and research agencies.
Budget 2024 makes a $3.5 billion investment in strategic research infrastructure and federal research support.
It increases financial support for graduate student and post-doctoral researchers, specifically $825 million over 5 years to increase the annual value of master’s and doctoral student scholarships to $27,000 and $40,000, respectively, and post-doctoral fellowships to $70,000.
The government will also invest $1.8 billion over five years, starting in 2024-25, with $748.3 million per year ongoing to SSHRC, NSERC, and CIHR.
In addition will invest the following amounts in the following major science institutions:
- $399.8 million to TRIUMF.
- $176 million to CANARIE.
- $83.5 million to Canadian Light Source.
- $45.5 million to the Arthur B. McDonald Canadian Astroparticle Physics Research Institute.
- $30 million to VIDO.
Indigenous programs
- $1.8 billion over 11 years, starting in 2023-24 to support communities in exercising jurisdiction under An Act respecting First Nations, Inuit and Métis children, youth, and families, including the first Inuit agreement to support community-led, prevention-based solutions to reduce the number of children in care.”
- $649.4 million over two years, starting in 2024-25, to improve elementary and secondary education on reserve, and ensure funding formulas meet the needs of growing communities; and, $545.1 million over three years, starting in 2024-25, for K-12 infrastructure to build and renovate safe and healthy learning environments for First Nations students.
- $350 million over five years, starting in 2024-25, to renew Canada’s commitment to Indigenous Financial Institutions, including $30 million over five years for the Métis Capital Corporations which have, for decades, provided critical support to Métis entrepreneurs and businesses.
- $242.7 million over three years, starting in 2024-25, to increase access to post-secondary education for First Nations students through the Post-Secondary Student Support Program.
- $225 million over five years, starting in 2024-25, with $45 million per year ongoing to Canadian Heritage for Indigenous languages and cultures programs, in support of Indigenous Languages Act, which is set for its first five-year review in October 2025.
- $167.5 million over two years, starting in 2023-24, to ensure Inuit children can access the health, social, and educational services they need, when they need them.
Students + skills training
- At an estimated total cost of $1.1 billion in 2024-25, extend for an additional year the increase in full-time Canada Student Grants from $3,000 to $4,200 per year, and interest-free Canada Student Loans from $210 to $300 per week.
- Permanently expand the reach of the Canada Student Loan Forgiveness Program to more health care and social services professionals working in rural and remote communities: Dentists; Dental hygienists; Pharmacists; Midwives; Teachers; Social workers; Personal support workers; Physiotherapists and Psychologists.
- $351.2 million in 2025- 26 for the Youth Employment and Skills Strategy.
- $200.5 million for Canada Summer Jobs in 2025-26.
- $150.7 million for the Youth Employment and Skills Strategy (YESS.)
- $825 million over 5 years to increase the annual value of master’s and doctoral student scholarships to $27,000 and $40,000, respectively, and post-doctoral fellowships to $70,000. This will also increase the number of research scholarships and fellowships provided, building to approximately 1,720 more graduate students or fellows benefiting each year. To make it easier for students and fellows to access support, the enhanced suite of scholarships and fellowship programs will be streamlined into one talent program.
Health care, disability and pharmacare
- Canada Disability Benefit: $6.1 billion over six years, beginning in 2024-25, and $1.4 billion per year ongoing, for a new Canada Disability Benefit, including costs to deliver the benefit.
- It will begin providing payments to eligible Canadians starting in July 2025, with a max benefit of $2400 per year.
- $243 million over six years, beginning in 2024-25, and $41 million per year ongoing, to cover the cost of the medical forms required to apply for the Disability Tax Credit.
- Amend the Income Tax Act to make additional expenses eligible for the Disability Supports Deduction.
- $1.5 billion over five years, starting in 2024-25, to Health Canada to support the launch of the National Pharmacare Plan.
Measures announced before the budget
- Adjustments to current year spending: The estimates sought approval for $13.2 billion in additional budgetary spending for 2023-24, bringing the total to almost $492.6 billion, an 11 per cent increase from the previous year.
- Renter’s Bill of Rights: to introduce a national standard lease agreement and require landlords to disclose an apartment’s pricing history. A $15 million fund for legal aid organizations that help tenants fight against ‘renovictions’ and landlord abuse and a proposed change to federal rules to count on time rental payments be considered in mortgage appraisals.
- Childcare spaces: $1 billion in loans and $60 million in non-repayable grants for public and not-for-profit childcare providers to expand services, $48 million investment over four years toward student loan forgiveness for rural and remote childhood educators, $10 million over two years to train more early childhood educators.
- National School Food Program: $1 billion over five years for a proposed National School Food Program.
- Canada Housing Infrastructure Fund: A new $6 billion Canada Housing Infrastructure Fund to accelerate construction and upgrading of critical housing infrastructure, including $1 billion to municipalities for urgent infrastructure needs and $5 billion for agreements with provinces and territories. An additional $400 million will be added to the pre-existing Housing Accelerator Fund to build 12,000 new units over the next three years. $1 billion for the Affordable Housing Fund to build affordable homes and launch a permanent Rapid Housing Stream of the Rapid Housing Initiative.
- Apartment Construction Loan Program: $15 billion top-up to the Apartment Construction Loan Program and extended loan terms and access to financing to include housing for students and seniors.
- Extending mortgage amortization period: Mortgage insurance rules will be amended to allow 30-year mortgage amortizations exclusively for first-time home buyers purchasing new build homes.
- Canada Rental Protection Fund: $1.5 billion fund to provide $1 billion in loans and $470 million in contributions to non-profit organizations to acquire affordable units to preserve rental prices.
- Homebuilding Technology and Innovation Fund: $50 million to modernize and expedite home building through the regional development agencies and $11.6 million to launce the Housing Design Catalogue.
- Deputy Minister of Public Lands and Housing: On April 12, the prime minister announced the creation of a new deputy minister of public lands and housing position within the Privy Council Office. The new role will oversee and report on federal efforts to build more homes for Canadians though the use of public langs. Paul Halucha will assume the role, concurrently with his other role as deputy secretary to the cabinet (clean growth.)
- AI Compute Access Fund: $2 billion investment to launch a new AI Compute Access Fund to build and provide access to technological infrastructure and computing capabilities to Canadian researchers and industry, $200 million to boost AI adoption in agriculture, health care and clean technology sectors, $50 million to launch an AI safety institute to protect against ‘advanced or nefarious AI systems,’ and $5.1 million to the Office of the AI and Data Commissioner to enforce the proposed AI and Data Act, Bill C-27.
- Defence Plan: $8.1 billion over five years and $73 billion over 20 years in defence spending, increase defence spending to 1.76 per cent of GDP by 2029-30.
- Youth Mental Health: $500 million for a new Youth Mental Health Fund.
- Skilled Trades and Foreign Credentials: $90 million for the Apprenticeship Service to train and recruit skilled trades workers, $10 million for the Skilled Trades Awareness and Readiness program, $50 million in the Foreign Credential Recognition Program.
- Public Transit: Announcing that, to access long-term, predictable funding for public transit through the federal government’s forthcoming public transit fund, municipalities will be required to take action that will directly unlock housing supply. This includes measures to:
- Eliminate all mandatory minimum parking requirements within 800 metres of a high-frequency transit line.
- Allow high-density housing within 800 metres of a high-frequency transit line.
- Allow high-density housing within 800 metres of post-secondary institutions.
- Complete a Housing Needs Assessment for all communities with a population greater than 30,000.
