Just weeks after taking office, the CAQ government got the chance to provide an update on Quebec’s financial and economic situation. This was an opportunity for the new government to adjust its priorities and build a solid foundation for its mandate.
The Quebec Minister of Finance, Eric Girard, took advantage of his visit to the Chamber on December 17, 2018, to take stock of the data in the update and present the general guidelines for the development of the next budget.
On December 17, for the first time since last fall’s election, the Chamber welcomed one of the new government’s cabinet ministers. Minister of Finance Eric Girard spoke to some 600 business representatives about the recent economic and financial update for the province.
The minister makes no secret of the previous government’s sound management of the province’s finances. The main highlights from the update reveal a large budget surplus, a GDP growth rate of 1.3%, an increase in the employment rate and a low level of debt. The new government is therefore in a good position, with considerable flexibility that will allow it to make a number of decisions in the next budget, notably with regard to investment and perhaps even tax cuts.
Recovering Quebec’s economic potential
Despite its good performance in recent years, Quebec still has a long way to go. In fact, Quebecers are 19% less affluent than the Canadian average and the productivity rate is 20% lower than in the rest of the country. Furthermore, the province is still in second place in terms of debt.
In spite of this, Minister Girard was optimistic and, above all, ambitious. He made a commitment to increase economic growth from 1.3% to 1.8% over the next four years.
“Quebec is doing very well and we want to take it to the next level. To do this, we must address structural issues that have developed over the last 30 years. We have an opportunity; we must make progress in the next five years. Ideally, these issues will be fully resolved over a 10-year period,” said Eric Girard, Quebec Minister of Finance.
These issues mainly concern the investment deficit, according to Mr. Girard. The government therefore wants to encourage companies to invest through the implementation of a 130% depreciation rate on new investments in intellectual property, software and IT, and conversion to clean energy, as well as on the purchase of machinery and equipment. In addition, the government plans to harmonize the effective tax rate with the new federal accelerated depreciation policy.
Debt and education at the heart of the government’s priorities
Another priority for the government is to reduce the debt burden. To this end, a $10 billion investment from the Generations Fund is planned, resulting in interest savings estimated at nearly $300 million a year.
According to the Minister, these savings will allow the province to implement an extremely ambitious education program, among other things, and to make up ground in this sector. When asked who is the most important minister in the government, Mr. Girard was categorical:
“It’s not the Minister of Finance. It’s not the Minister of the Economy [...]. It’s not the Chair of the Conseil du trésor [...]. The most important minister in our government is the Minister of Education.”
“‘Good economics leads to good policies’ […]. I intend to manage Quebec’s public finances, your public finances, and the services you are financing in a prudent manner,” said Mr. Girard.