It’s budget day in Canada and it’s a big one as it’s Prime Minister Mark Carney’s first edition. He’s promised a transformational budget that’s likely to include some heavy cuts to operational government spending along with some heavy spending on capital projects. What’s less clear is how tax policy will change. There is some suspicion that he will cut corporate taxes in order to stay ahead of US rates but that could be offset somehow on the personal side.

CBC today reports that the budget will include ‘a change in the tax structure to promote competition.’

The source, who spoke to CBC News on the condition they not be named
since they were not authorized to speak about the budget before it’s
public, said the changes to the tax structure are aimed at spurring
growth and removing risks to invest in Canada.

For the market, the bottom line will be a big one with the deficit forecast to rise to $70-100 billion from $42 billion projected a year ago. I don’t see that number as a problem for the loonie as Canada’s debt-to-GDP is well below US and international standards. If anything, some growth-boosting policies could boost the loonie and force the BOC to hold (or even hike down the line).