Federal budget 2014: What to watch

Canadian consumers and businesses are looking for a few goodies when the federal government unveils its latest budget on Tuesday, but the handouts will likely be minimal.

No big tax cuts or spending programs are anticipated, as the Conservative government sticks with its plan to eliminate the deficit next year, just in time for an expected trip to the polls.

“In all likelihood, this will be a low-key affair, with lots of small items but nothing large enough to detract from the steady drumbeat of budget belt-tightening,” says CIBC economist Avery Shenfeld.

Few goodies expected for consumers

But like any budget looking to score some political points, there should be a few benefits for Canadians.

Finance Minister Jim Flaherty has hinted at measures to address prices differences between consumer goods in Canada and the U.S., a hot topic for Canadian shoppers.

“We have not let that issue go away," Flaherty told reporters during his annual pre-budget, shoe-picking press conference on Friday.

Citing sources, the Globe and Mail newspaper reports the budget will also include measures promised in October's Throne Speech to help bring Internet access to 280,000 more households and businesses in rural and remote regions of Canada.

On Sunday, Flaherty told CTV's political program Question Period that infrastructure projects will be a priority in the budget and there will also be measures to address unemployment among youth, aboriginals and the disabled.

Deficit reduction and growth

Economists at the Royal Bank expect the government this latest budget to “set the stage” for a number of more newsworthy initiatives once its books are better balanced a year from now.

“Expenditure restraint is expected to remain the near-term focus of the government’s agenda and as a result, new initiatives will likely be limited,” says economist Laura Cooper.

If the economy continues to recover and the government keeps slashing costs, she says it could potentially return to a surplus sooner.

Flaherty appears to ruling out that possibility.

“If we really forced the numbers, we might be able to get close to a balanced budget,” he told reporters during the pre-budget event on Friday. “I’ve never been a believer in that … I think when we balance, it will be next year, we need to have the confidence of the Canadian people that we are clearly balanced, without question.”

The government recently estimated a shortfall of $17.9 billion for the 2013-14 fiscal year ending March 31. From there, it forecast the deficit narrowing to $5.5 billion in 2014-15 and then reaching a surplus of $3.7 billion in 2015-16.

For those worried about the government setting aside enough money for a rainy day, Flaherty claims that pot sits at $3 billion, to help with unexpected events such as the devastating flooding last year in Alberta.

Assuming the economy holds up, next year will also be a good time for the government to boast a balance budget and dole out some sweeteners ahead of the next election.

Bottom line: Canadians shouldn’t expect any big announcements on Tuesday. After all, the budget is taking place in the middle of the Winter Olympics.

The numbers will likely be of most interest to economists looking to update their forecasts and businesses cross their fingers for support or some kind of break, somewhere.

“With the government’s goal to balance the budget by next year, we don’t anticipate major increases in spending,” says Elio Luongo of KPMG.

“We still expect to see a range of tax measures as the Conservatives maintain their focus on tax fairness and tax tightening measures. With that in mind, we may also see some signals of things to come such as joint filing by spouses, business initiatives on training incentives for young apprentices and more changes to certain incentive programs and deductions. ”

Canadians will be forgiven if they choose instead to spend Tuesday afternoon and evening catching up on the men’s half pipe or women’s ski jumping competitions that aired earlier in the day.

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