The Canadian economy could grow at a slower pace, and have 108,000 fewer jobs as the federal government cuts more than $5 billion in spending and eliminates the deficit by 2015, according to a report from Parliament's spending watchdog.
The economic and fiscal outlook from Parliamentary Budget Officer Kevin Page, released Wednesday morning, also predicts marginal savings from changing the age of eligibility for Old Age Security.
The Conservative government will cut $5.2 billion from operating spending over the next three years and eliminate 19,200 federal jobs as part of its plan to balance the budget.
Those cuts will allow the government to eliminate the deficit by 2015, just in time for the next federal election, and have a $10.8-billion surplus by the 2016-17 fiscal year - $3 billion more than the government is projecting.
That difference, the PBO argues, should give the government room to either increase spending or cut taxes.
The federal government and Page have clashed in the past over his projections, including over the controversial procurement of the F-35 fighter jet. His latest report was no different.
"Kevin Page has flagged the obvious - when you cut government spending and eliminate wasteful programs, the government does not need as many public-sector workers," said Mary Ann Dewey-Plante, a spokesperson for Finance Minister Jim Flaherty.
"We were clear in our budget document we were eliminating 12,000 positions - not the number Kevin Page has created."
Page's report predicts by 2014, real Gross Domestic Product - a measure of all goods and services produced by an economy - will be 0.4 per cent lower than would have been the case if the government didn't reduce spending.
The cuts also will mean employment will be 0.2 per cent lower by 2014, equivalent to 43,000 fewer jobs, the PBO said. By 2015, that could mean 108,000 fewer jobs in the economy as a whole, the report said.
Put another way, the unemployment rate is projected to be 7.9 per cent, rather than 7.5 per cent without any spending reductions, the PBO said.
Dewey-Plante said the government wasn't changing its plans because of Page's report. "Canada's leading economists have been very supportive of that plan, and we're committed to implementing it to ensure long-term jobs and growth for Canada,"she said.
Page is scheduled to speak to a Commons committee Thursday, after which he said he would answer questions.
A second report on government-spending cuts suggests estimates for savings should be taken with caution because decisions for program cuts could be reversed, and projections not met.
The PBO is recommending parliamentarians ask for more details about how cuts will occur and where jobs are being lost.
Cuts will drag on economy: report (external - login to view)