Invesco Canada blog

Insights, commentary and investing expertise

Avi Hooper | April 8, 2022

The Federal budget: New measures aim to make life more affordable for Canadians

The Federal Canadian budget for March 2022/23 was tabled to the House of Commons. It was focused on making life more “affordable” for average Canadians, paid for by larger-than-expected tax revenues and the announcement of additional taxes on financial sector profits and a permanent increase in the corporate tax rate for large corporations.

Highlights of the budget include:

  • Canada Recovery Dividend. This measure is expected to collect C$6 billion over the next six years from banks and insurers on the extraordinary profits generated during the pandemic.
  • Infrastructure Fund. This includes C$15 billion of public sector funds seeking private sector leverage to help develop new sustainable technologies. 
  • First-time buyer tax-free savings account. This program would allow young Canadians to save up to C$40,000 towards a home purchase

The Canadian economy has recovered from the health pandemic materially better than earlier budget expectations. The large windfall in Federal tax revenues has been managed prudently. Fiscal deficits are set for a steady decline and net government debt as a percentage of the economy is expected to remain the among lowest in the G20.1 Canada’s AAA credit rating is not under threat.

Ambitious immigration targets set against a lack of housing supply remain a tailwind for house prices. The budget announced plans for affordable housing construction, while increasing penalties against foreign investors and speculators across the residential housing market. We don’t expect that these policies will resolve the housing shortage across Canada.

There was no market reaction post the budget announcement. It was a conservative economic outlook, with fiscal prudence and a realization that the cost of funding deficits is now set to rise. From a global credit quality perspective, we believe Canadian government debt provides global fixed income investors the confidence needed in an uncertain world.

1 Source: Bloomberg

Important information

NA 2117898

Header image: Leo Patrizi / Getty

Commissions, trailing commissions, management fees and expenses may all be associated with mutual fund investments. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Please read the simplified prospectus before investing. Copies are available from your advisor or from Invesco Canada Ltd.

This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.

All investing involves risk, including the risk of loss.

Fixed-income investments are subject to credit risk of the issuer and the effects of changing interest rates. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. An issuer may be unable to meet interest and/or principal payments, thereby causing its instruments to decrease in value and lowering the issuer’s credit rating.

The opinions referenced above are those of the author as of April 8, 2022. These comments should not be construed as recommendations, but as an illustration of broader themes. Forward-looking statements are not guarantees of future results. They involve risks, uncertainties and assumptions; there can be no assurance that actual results will not differ materially from expectations.

The information provided is general in nature and may not be relied upon nor considered to be the rendering of tax, legal, accounting or professional advice. Readers should consult with their own accountants, lawyers and/or other professionals for advice on their specific circumstances before taking any action. The information contained herein is from sources believed to be reliable, but accuracy cannot be guaranteed.