Budget austerity will constrain economic growth

Despite an already modest deficit, the new federal budget includes plans to forge ahead with austerity measures that are likely to restrain economic growth. We doubt that the economy will perform as strongly as the government hopes, however, mainly due to a weakening housing market over the next couple of years. As such, we think that more fiscal policy stimulus will eventually be needed. Thankfully, unlike others further abroad, Canada's government has the scope to do so.