Ottawa Federal coffers are overflowing with an $11.2-billion budget surplus nearly three times more than predicted and Finance Minister Ralph Goodale said he expects the annual windfalls will continue for five years, totalling $54.5-billion by 2010-2011.
The minority Liberal government is proposing using more than 70 per cent of this future cash unveiled in new projections Monday to pay for a $39-billion mini-budget that will double as its election platform.
Buoyed by Canada's good fortune, Ottawa also announced it was setting a more aggressive target for shrinking the federal debt, to levels not seen since the mid-1970s.
"Canada has gone from economic laggard to leader and we can look forward to the future with tremendous confidence," Mr. Goodale said in his economic update address.
Ottawa says this bonus comes from "significantly higher" estimates for corporate tax revenue over the next five years, based on higher forecasts for natural gas much of which is exported and a belief that corporate tax profits will be rosier than expected.
"Record profits for business, including natural gas exporters, are much stronger than projected at the time of the [February] 2005 budget and they are generating greater revenues for the government," Mr. Goodale said.
The federal government will draw down much of these future surpluses to fund the proposed $39-billion tax and spending mini-budget unveiled Monday, leaving $15.5-billion in surplus cash unspent for the next five years.
Yesterday Mr. Goodale said the federal government will aim to pay off enough debt by 2020 that the national debt represents only 20 per cent of Canada's annual economic output. This replaces an earlier target of lowering the federal government's so-called debt-to-Gross Domestic Product ratio to 25 per cent by 2014-15, a goal that Ottawa is on target to achieve.
That's a big drop from the dangerous peak of 1995-1996 when Canada's debt to GDP ratio stood at 68.4 per cent.
Officials say that the Canadian government can achieve its new target by paying off debt at the same rate as it currently does. Ottawa expects to make a $3-billion payment against the national debt this year, lowering it to $496.9-billion.
Mr. Goodale Monday projected that Canada's economy will grow by 2.8 per cent this year, down from a February 2005 estimate of 2.9 per cent. The estimate is based on projections from 16 private sector forecasters.
"What all of these facts and figures tell us is that Canada's economy is doing very well and it is expected to continue to do well for the foreseeable future," the Finance Minister told the House of Commons finance committee.
But he warned of several risks "which could throw our economy off course," including surging energy costs that could undermine consumer confidence in Canada and the United States, which is this country's largest customer, "reducing demand for Canadian goods on both sides of the border."
He also said a second risk is that the Canadian dollar strengthens too much against the U.S. dollar because of Washington's massive budget and trade deficits, "making things tougher for our exporters" in Canada.