Finance Minister Bill Morneau delivered the 2017 Canadian federal budget. Brian DePratto, Senior Economist, TD Bank, talks to Sara D’Elia about what the changes could mean for jobs, the loonie and oil. Click here for the full TD Economics report.
I mean, really I think this budget was notable by it's absence of a lot of things. People were looking for was a bit more like maybe a fiscal update than a full-fledged budget. There were some concerns around capital gains taxes, option taxation. In the event, none of that was in there. What we did see was some small tweaks to taxes around the edge, some changes around taxation of Uber, for instance, and maybe just a little bit more spending out of the government, but really just a business as usual kind of approach.
Given that it's business as usual, is there anything that you would say moved the dial today?
Not significantly. It really was a lot of confirmation of things we were looking for or things that had been announced in the previous budget. So we saw a little bit more around the clusters for innovation, things like that, a little bit, not much, but a tiny bit more information on the Canadian infrastructure bank. But overall, just really reconfirming a lot of what we'd already seen in the last budget, and of course, the fall of fiscal update.
On the innovation piece, one of the things we were expecting is some type of indication in terms of what this could mean for jobs. Was there anything today that you would say indicated we could see more jobs creation or it could lead to more jobs?
Not directly, but there's a lot of promising developments here. One thing that I really liked that was in this budget, they've changed the qualification related to EI, Employment Insurance. So before if you were unemployed and collecting EI, you couldn't actually go to school. So now they've changed it so you can go back, maybe upgrade or change your credentials, try to get a job maybe in a different field, something like that. And I think that's a very positive development.
So one of the other pieces I wanted to ask you about is oil because, I mean, that's been a huge focus for us for the last little while. And we heard today that oil prices are expected to be sub $60 until around 2021. So I mean, a few things here, how does that play into your expectations? What do you think it could mean for oil producers in Canada? And what do you think it could mean for Alberta?
Well, it's a little bit conservative, I would say. Our view, if you look out to the longer term, maybe you could see oil around $65, $70. Forecasting oil, of course, is one of those most difficult jobs there is. There's always some uncertainty there. But even at the levels we're talking about, we're not talking about the kinds of big investment that we saw previously. So at those levels, existing facilities are profitable.
A lot of the big costs for many of the producers, they've been bore now. They've done that investment. And so then we're likely to see production continue to expand. But with that kind of number, this is not going to move the dial in terms of new big projects. You really want to see oil, I'd say, a fair bit higher than that before companies really start considering breaking new ground in the oil sands.
And in terms of the loonie, does this move it one way or the other? Where do you think we could see the loonie settle in?
I'm not sure the budget's going to have that big of an effect, especially given they're not really bothering that much more money so it shouldn't be too much of an impact on rates from this budget itself. Ultimately, I think the big driver for the loonie right now, it's going to come down to monetary policy. Things are looking a little bit better here in Canada. Maybe the Bank of Canada moves a little sooner, but that still means probably a 2018 hike, whereas the Federal Reserve they obviously just hiked recently. And all indications are they're going to continue that path. So that's going to put a little bit of downward pressure on the loonie in the near term, maybe bring us down a cent or two. And I think that's really going to be the key driver moving forward.
Brian, in terms of overall what you've seen today, who are the clear winners and losers?
Given there's not a whole lot of new spending here, I'm not sure there's a ton of winners. There's a few that stand out. Some would be working mothers, for instance. There's been some changes around employment insurance. I think really on the other side of it, they have put more money into Syria enforcement, and one area they've talked about is a private professional corporation. So that's kind of your architects, your dentists, and people like that. They're going to be looking a lot more closely at how those structures are used. So certainly that kind of should raise an eyebrow for that group of Canadians.
And I think the other one that stands out, and a lot of people are talking about, is Uber. So they've reclassified a taxi service to make it a broader definition, including Uber. And so now they're going to be paying GST on rides.
Thank you very much. That's Brian DePratto from TD Economics. Thank you for joining me, Brian.
Thank you for having me.