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2021 Federal Economic and Fiscal Update: Justin Trudeau’s government inches forward

Minister of Finance Chrystia Freeland

Photo credit: THE CANADIAN PRESS/Justin Tang

Photo credit: THE CANADIAN PRESS/Justin Tang

Minister of Finance Chrystia Freeland provided Justin Trudeau’s government’s long-awaited Fiscal Update this afternoon from the safety of her office after it was revealed that two of her staff members had tested positive for COVID-19—a stark reminder that the fight against the pandemic is not yet over. This update, which follows their recent Speech from the Throne, was the first such comprehensive economic update from the government since Budget 2021.

From NATIONAL’s perspective, the update provides the following opportunities for the Prime Minister and his cabinet:

  • The provision of a financial “level set” to Canadians after another period of heavy spending and significant economic commitments regarding COVID-19 measures (and otherwise)
  • A chance to frame the government’s intended direction in the coming months, and in advance of Budget 2022, on key areas such as climate change and reconciliation
  • Announce new and targeted spending around such select areas, building a political “bridge” to the larger political landmark: Budget 2022.

While today’s update likely accomplished all the aforementioned objectives for Justin Trudeau’s government, there remains little clarity on the details that will underpin the early months of this new minority parliament.

By any objective measure, such minutia matters, particularly given that the government has published ministerial mandate letters since their election in late 2015. Governing is—unquestionably—often in the details. And these letters, in turn, have provided public promises—and related political expectations—around the top priorities of the government. NATIONAL expects the mandate letters will likely be released before the holiday break.

In the meantime, most observers concur: the government is simply not in a hurry to advance “big files” since their late September 2021 election win. There is a discernible “slow roll” feel with the approach since then, notwithstanding movement on specific pieces of legislation.

From NATIONAL’s viewpoint: this won’t last. And today’s update will likely serve as a political catalyst for how the government will attempt to shape the coming 12 months, particularly around how best to manage the always-treacherous minority parliament dynamic, where it is always a confidence vote away from losing its political control over the wheel of government.

The details

Minister Chrystia Freeland highlighted that Canada reported a deficit of $327.7B for the last fiscal year, and of $144.5B for this fiscal year. The government had previously forecasted a deficit of $354.2B and $154.7B, respectively, in the April budget.

The Minister also flagged that the country’s debt-to-GDP ratio is expected to peak this fiscal year at 48 percent and then fall steadily along with the deficit.

Further, economic growth is expected to hit pre-pandemic levels by early 2022.

These numbers are more positive than expected, considering the economic impacts the pandemic has had on the global supply chain. The update states that Canada has the lowest net debt-to-GDP ratio among its international peers.

Other highlights included the following:


The fight against COVID-19 was the central theme of this update. The government focused on their pandemic support investments and announced $4.5B for possible new costs associated with the new Omicron variant. Booster shots, vaccinations for children, more border testing and local support measures were outlined as essential components to the fight against COVID-19 and the new variant. While there is no question that provinces want more money for healthcare transfers, no such promises were made in this update.

Climate change

Acknowledging that climate change is having a direct impact on our economy and supply chain, the government signalled that the green transition is a top priority in today’s update. The government announced $5B for flood recovery in British Columbia. They also signalled that Budget 2022 will likely include new green measures. NATIONAL expects the mandate letters to lean heavily in this direction across multiple departments.


The Throne Speech outlined the government’s commitment to the ongoing legal issue with respect to Indigenous children, and this update announced what seems to be a significant $40B settlement to this ongoing legal issue.

Opposition Reaction

Conservative Party

Conservative leader Erin O’Toole stuck to the well-worn party line that the Liberals are responsible for inflation. This idea has been a prominent point of attack during Question Period and in committee. Pointedly, he said that PM Justin Trudeau thinks that “budgets balance themselves.” Conservative finance critic Pierre Poilievre outlined the party’s demands on Sunday, saying: "Our demands are very simple: less tax, less deficits, less inflation." It is clear that the party believes that the government is to blame for inflation, but the issue is complicated, and cannot simply be blamed on pandemic support measures, no matter how passionate Erin O’Toole and Pierre Poilievre are about PM Justin Trudeau admitting fault.


NDP Leader Jagmeet Singh signalled that he was less than impressed with the update. While there are measures the NDP supports, Mr. Singh says that he would have liked to see more focus on the issue of inflation, and how Canadians will be supported.

Next steps

NATIONAL will continue to assess how major announcements such as today’s update link together in the early days of the Prime Minister’s third consecutive mandate. All such moves form pieces of the governing puzzle for any government.

In the meantime, the chances of the update—or otherwise—triggering an election in the first six months of the new parliament are virtually non-existent. Yet the positioning of all the federal parties should be viewed as part of wider political maneuvers around future electoral prospects, not merely the main issues at hand.

NATIONAL’s market leading pan-Canadian public affairs team can help organizations advance their objectives in Ottawa and various provincial capitals. From climate change to healthcare, innovation to agriculture, our team is comprised of former senior political leaders from all regions and political stripes.

We look forward to hearing from you.