Home Economics Canadian Finance Minister Bill Morneau is expected to unveil a restrained budget on Tuesday

Canadian Finance Minister Bill Morneau is expected to unveil a restrained budget on Tuesday

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With the domestic economy going strong and the Bank of Canada hiking rates, the Liberal government is in a balancing act of slowly reining in deficits while taking steps to bolster long-term growth as U.S. tax cuts and protectionism threaten Canadian exports and competitiveness.

Household debt is also at a record high even as job gains bring the country closer to full employment, a bad news-good news dichotomy that will leave the government wanting to rebuild its rainy day cushion without abruptly withdrawing stimulus.

“Canada at this juncture is an incredible risk management exercise,” said Frances Donald, senior economist at Manulife Asset Management.

“From my perspective, a stay-the-course budget that keeps gunpowder aside for future downside shocks could be just as well received — or better — than a budget focused on spending.”

In its October update, the government estimated the deficit at C$19.9 billion ($15.71 billion) for the fiscal 2017-18 year ending March 31, down from the C$28.5 billion anticipated in last year’s budget.

For the upcoming 2018-19 fiscal year, the deficit is seen at C$18.6 billion, including C$3 billion for risk adjustment.

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