The federal government tabled its final budget release before the next election in October 2019, and in it there’s been promise of support for first-time home owners as well as farmers and students, among others. It comes with plans to tackle the opioid drug crisis, amp up border security, and includes billions of dollars in spending to improve living and working conditions for First Nations, Metis and Inuit. This is Finance Minister Bill Morneau’s fourth budget release.
The projected deficit is $19.8 billion for 2019-20, which is up from the earlier projection of $19.6 billion made in November 2018. This includes a $3 billion risk adjustment. The outlook also expects a 1.8% growth, down from the fall’s 1.9% prediction. The Liberal government’s big bet, one that was an essential bid in their campaign platform, was to balance the budget by 2019. Now, with the news of the projected deficit, the Canadian government will need to borrow more money to attempt in fulfilling this promise.
Budget 2019 seeks to make housing more affordable, especially for first-time buyers. The federal government promises to provide up to $1.25 billion over three years beginning in the 2019-20 fiscal year, and this will be allocated through the Canada Mortgage and Housing Corporation (CMHC). Its new First-Time Home Buyer Incentive (FTHBI) will allow home buyers to reduce the amount of money they need for an insured mortgage.
Home owners will be also able to withdrawal $35,000 from RRSPs, up from the previous amount of $25,000. There will also be an additional $10 billion in financing through to 2028, helping build 42,500 new affordable units across the country. What the type of units (one bedroom, duplexes etc.) and accommodations will look like — we will have to see.
“While the borrowing amount has increased from $25,000 to $35,000, bear in mind that the time for repayment remains 15 years. As was the case even before this increase, potential users of the Home Buyers’ Plan should project out their cash flow to be sure they can fulfill that repayment schedule,” Doug Carroll, tax and financial planning expert at Meridian, tells Daily Hive on Tuesday. “Otherwise, un-repaid amounts become taxable income, which could make future finances very tight.”
There has been an ongoing concern around a skills gap in Canada and problems receiving training, so to address these concerns the government has vowed $1.7 billion over five years ($586 million a year thereafter), for the Canada Training Benefit. Workers between the ages of 25 and 64, earning between $10,000 and $150,000 a year, will receive a tax credit for training. Those that qualify could receive up to $250 back per year. There’s a maximum limit of credit back though: $5,000 across a lifetime. There will also be measures in place to help support people financially when they are taking approved courses, for example.
Another major concern, especially for millennials and emerging generations, is student debt. According to Budget 2019, there will no longer be interest charged during the sixth-month grace period students receive following graduation. Students will also see the interest rate lowered by 2.5%, which is said to will help save the average borrower approximately $2,000 over the course of the loan. The new changes will cost approximately $1.7-billion over the next five years beginning in 2019-20.
“Post-secondary education is not getting any cheaper, and this is it least one way to provide a bit of relief,” says Carroll.
Canadians have been promised that high-speed internet will be available across the country by 2030. So, in over a decade we are expected to see this addition fully integrated. This goal will help those people living outside major urban centres and cities, providing Canadians with greater access to opportunity.
The government will invest $1.18 billion over five years to tighten border security and review of asylum applications. The government also has plans to help with prescription drugs, creating a national pharmacare plan. It also announced the Canadian Drug Agency, a new entity to evaluate drugs. $500 million a year will be invested to subsidize costs of drugs. And the budget includes a $50 million plan to tackle dementia and $31 million over five years will be doled out to fight the opiod crisis.
There will be huge breaks for those opting for more environmentally efficient modes of transportation. Canadians can receive rebates up to $5,000 on electric or hydrogen-fueled cars, for example. Farmers will also receive help to the tune of $3.9 billion. This amount is to help farmers affected by trade conflicts seen with the US and China.
$4.5 billion will be allocated out in order to improve living conditions of First Nations, Inuit and Métis Peoples in Canada. $2.2 billion will be given over five years for the First Nations, Inuit. and Métis Peoples in Canada, helping fund projects and infrastructure.
As with many of the news reported today, further details are still to come. As Doug Caroll notes, we still need to look at all the financial aspects of the transactions with a fine tooth comb. We also really need to think about debt, but also repaying the debt whether that comes from education or home ownership.
To read the full Budget 2019 release head here.