2024
Fall Economic Statement
Overview & Analysis
Scene-Setter
Today’s Fall Economic Statement was defined not by its contents, but by the political chaos that surrounded its delivery. With a bombshell resignation by MP Chrystia Freeland from the role of minister of finance mere hours before she was expected to deliver the FES, questions swirled about the fate of today’s document, and the future of Trudeau’s leadership of the Liberal government.
Setting aside the palace intrigue, what we learned today about the state of Canada’s fiscal health was newsworthy in its own right. The 2023-2024 federal deficit has grown to $61.9 billion, with today’s update including a hotly-anticipated line item for a border security package meant to satisfy incoming US President Donald Trump. Newly-minted Finance Minister Dominic LeBlanc was all smiles as he was sworn in at Rideau Hall at the same time as the FES was posted online – a scaled-down departure from the usual speech in the House of Commons.
In a typical year, one might debate whether any of today’s new program spending or economic measures will be enough to keep the prime minister and his government afloat. This year, that seems to be beside the point. Today’s FES is shaping up to be more about the drama it precipitated than the numbers on the page.
By the Numbers
Deficit
$61.9B
Net New Spending
$21.1B
Debt-to-GDP
38.6%
Highlights
- Introduce legislation for the remaining elements of Canada’s Consumer-Driven Banking Framework, including accreditation and common rules. Launch Canada’s Consumer-Driven Banking Framework in early 2026
- $44.3M over three years, beginning in 2025-26, on a cash basis, to FCAC to implement the Consumer-Driven Banking Framework
- Amend the payday lending exemption in the Criminal Code to prohibit the sale of credit insurance products in connection with a payday loan
- Amend the payday lending exemption within the Criminal Code requiring a minimum term on payday loans of 42 days and for lenders to accept payment in installments
- Accelerate $2B in low-cost financing, supporting 4,000 homes to be built faster under the Apartment Construction Loan Program
- $5B through the Canada Housing Infrastructure Fund’s provincial and territorial stream
- $50M over two years, starting in 2025-26, through the Affordable Housing Fund for affordable housing providers to use for pre-development work
- $50M from the Affordable Housing Fund’s Rapid Housing Stream in 2025-26 to build more women’s shelter spaces
- $362.7M over five years, starting in 2028-29, to extend the Federal Community Housing Initiative, to provide tens of thousands of households with certainty that they will continue to receive rental assistance
- $600M in interest-free loans to support 15,000 to 24,000 more homeowners in reducing energy costs, through the Canada Greener Homes Loan Program
- Expand CRA’s outreach to the broader financial sector, including mortgage lenders, on how to best design and implement a new tool to combat mortgage fraud
- $1B, in 2025-2026, to launch a fourth round of the Venture Capital Catalyst Initiative
- $1B to invest in mid-cap growth companies
- $15B in aggregate loan and equity investments for AI data centre projects that receive investment from one or more Canadian pension funds
- $150M over three years, starting in 2024-25, for the Global Innovation Clusters and $24M over two years, starting in 2025-26, for the National AI Institutes to support the continuation of their AI commercialization activities
- $500M over four years, starting in 2025-26, to the Business Development Bank of Canada to provide financing and expertise to help small- and medium-sized businesses adopt digital technologies, with a priority focus on AI
- Implement conditions for provincial and territorial Crown corporations to access the Clean Electricity investment tax credit within a jurisdiction
- Announce the design and implementation details of the EV Supply Chain investment tax credit
- $43.5M over five years, starting in 2025-26, to expand the Clean Hydrogen investment tax credit to include hydrogen produced from methane pyrolysis
- Reinstate the Accelerated Investment Incentive
- Amend regulations to remove the 30 per cent rule for investments in Canadian entities
- Explore lowering the 90 per cent threshold that currently limits municipal-owned utility corporations from attracting more than 10 per cent private sector ownership
- Engage airports and pension funds on potential measures that would further incentivize investment and development on airport lands, including exploring potential changes to airport authority ground leases
- Expand the mandates of the Cabinet Committee on Canada-U.S. Relations, the Ministerial Working Group on Regulatory Efficiency for Clean Growth Projects, and the Privy Council Office’s Clean Growth Office to get AI data centres built faster
- Consider legislative measures to compel payment processors to fully pass credit card transaction fee savings on to small businesses
- Modify certain design elements of the Canada Carbon Rebate for Small Businesses in respect of the 2024-25 and later fuel charge years to ensure that smaller businesses are receiving the most support by creating a new base payment
- Introduce legislative amendments to the Canada Business Corporations Act to create a regulatory authority to enable climate-related financial disclosure requirements for large, federally incorporated privately held corporations
- $27.8M over five years, starting in 2025-26, for a new Red Tape Reduction Office
- Consider applying conditions on major federal transfers to provinces and territories requiring the elimination of specific barriers to interprovincial trade and labour mobility
- Minister of Public Safety, Democratic Institutions and Intergovernmental Affairs will lead a review of the Canada Free Trade Agreement
- $43.8M over two years, starting in 2025-26, to Transport Canada to support the operations and maintenance of the Hudson Bay Railway through the Remote Passenger Rail Program
- Impose tariffs on imports of certain solar products and critical minerals from China early in the new year, and impose tariffs on semiconductors, permanent magnets, and natural graphite from China beginning in 2026
- Enforce procurement trade obligations to limit access to Canada’s federal procurement market to Canadians and our trading partners who provide access to Canada, starting in spring 2025
- Introduce legislation to create a new supply chain due diligence regime, requiring government entities and businesses to scrutinize their international supply chains for risks to fundamental labour rights and take action to resolve these risks, including the creation of a new oversight agency to ensure ongoing compliance
- $25.1M over two years, starting in 2025-26, to Global Affairs Canada and the Canada Border Services Agency to implement new regimes, and introduce legislative amendments to strengthen Canada’s ban on imports of goods produced with forced labour, including increasing the onus on importers to demonstrate that their supply chains are free of forced labour
- $1.3B for a comprehensive border security package to Public Safety Canada, the Canada Border Services Agency, the Communications Security Establishment, and the Royal Canadian Mounted Police
- Amend the Criminal Code to make bail and sentencing laws stricter to better respond to auto theft, break and enter, extortion, and arson crimes
- Introduce legislative amendments to the Customs Act to grant the Canada Border Services Agency new authorities to inspect goods destined for export, including obligating warehouse operators and shippers to provide adequate accommodations for CBSA officers to carry out their mandate
- $597.9M over three years, starting in 2024-25, to Public Safety Canada and the RCMP to remove prohibited firearms from communities and fairly compensate assault-style firearms owners
- $90M over six years, starting in 2024-25, with $20M ongoing, to Health Canada to expand and make permanent the Sexual and Reproductive Health Fund
- $15M over three years, starting in 2024-25, to the Department for Women and Gender Equality for the Women’s Program, to help build capacity of women’s organizations, such as to help them advance projects focused on ending gender-based violence
- $189M over five years, starting in 2025-26, to Innovation, Science and Economic Development Canada for the Black Entrepreneurship Program
- Introduce legislative and regulatory measures to further strengthen Canada’s AML/ATF framework, as well as support its upcoming Mutual Evaluation by the FATF in 2025-26
- Develop a new task force to share information relating to high-end money laundering schemes, including related to fentanyl trafficking
- Launch a strategic review of government operations and programs with a focus on expanding the use of AI in the public service
- Introduce the Small Business Innovation and Procurement Act that would obligate federal government departments and agencies to procure a minimum of 20 per cent of goods and services from small- and medium-sized Canadian businesses and a minimum of 1 per cent of goods and services from innovative firms
- $64.7M over six years, starting in 2024-25, to Employment and Social Development Canada to finish migrating Old Age Security (OAS) onto a secure, user-friendly platform
Insights
The larger-than-projected deficit is sure to draw ire from the government’s critics, particularly those on the Official Opposition benches. Last week’s key interest rate cut by the Bank of Canada, and the recent GST holiday may soon be overshadowed by the financial picture provided in today’s FES. Expect the Conservatives to seize on the now $61.9B deficit to draw contrast from the government on management of the economy.
The timing of the FES coincides with fraught Canada-US trade discussions. Heightened rhetoric from President-elect Trump adds further anxiety to his threat to sign an executive order imposing a 25% tariff on all Canadian exports to the US. The government promised to address the state of the relationship in this document, but the emerging political crisis facing the Trudeau government will overshadow the promised investments to improve border security.
The Fall Economic Statement signals a clear shift in this government’s approach to providing military aid to Ukraine. The election of a Ukrainian skeptic in Donald Trump has introduced a new variable, which has resulted in many NATO nations re-evaluating their spending priorities related to Ukraine. As a result, the government is beginning to put greater emphasis on supporting domestic Ukrainian capacity, rather than providing any additional direct military aid. The resignation of Chrystia Freeland, a vocal proponent of supporting Ukraine with financial and military aid, stands to impact future government spending.
Housing inflation remains the leading driver of cost of living increases for Canadians, and the Fall Economic Statement extends the Liberals’ efforts to show Canadians they are addressing the housing crisis, while adding to their housing plan to build four million homes by 2031. The measures in the FES are certain to be drowned out by coverage of the on-going political saga facing the prime minister. While Chrystia Freeland’s resignation may be grabbing all the headlines, the minister responsible for housing, Sean Fraser, also announced he is stepping down as cabinet minister and leaving federal politics.
Challenged by the looming threat of 25 per cent tariffs, Prime Minister Justin Trudeau and Canada’s premiers met for a second time last week. Some provinces have since shared plans on how they will individually respond, including retaliatory measures like cutting off energy exports to the U.S. (Ontario) or establishing a new border surveillance unit (Alberta). Amid promises to secure the border, expect more details to flow from the overall $1.3B border security package announced in the FES today, including potential funding for new platforms and personnel to shore up Canada’s southern border.
Next Steps
What lies ahead is heavily contingent on how the Liberal government’s current political crisis unfolds. After being sworn in as minister of finance at 4:30PM today, Dominic LeBlanc affirmed his focus on beginning preparations for the 2025 federal budget. This would, presumably, include a Pre-Budget Consultation (typically launched by the minister of finance in December or January). However, LeBlanc’s job at Finance depends on Trudeau holding on to his job as prime minister. For as long as that remains uncertain, the budgetary path forward is marked with commensurate uncertainty.
Following Chrystia Freeland’s resignation from the post earlier today, the prime minister has added finance to Minister Dominic LeBlanc’s portfolio. Trudeau may elect to shuffle his cabinet more widely to plug up some big holes in his front bench.
The finance minister will consider budget letters from cabinet ministers before making final decisions on Budget 2025. The letters include ranked priorities from ministers. The need to balance fiscal restraint with strategies to attract voters will make for tough decisions.
The government may release draft legislation before introduction of a FES bill in the House.
The government generally uses an omnibus bill to roll out legislative measures in the FES and a ways and means motion to allow for new spending. The ongoing filibuster in the House over a question of privilege could make it harder to advance legislative items. Bills can, however, be introduced in the House or Senate and committees can study proposed legislation before it is voted on in the House.
The upper chamber often moves to allow pre-study of high priority government legislation, including budget implementation acts. The government could also introduce a FES bill in the Senate.
Today’s fiscal update serves as a prelude to the federal budget, usually tabled in the late winter or spring. The fiscal projections presented today will be determinative of the government’s spending power going into 2025.
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