MNI INTERVIEW2: Oil Windfall Can Aid Affordability - Champagne

Canada's finance minister told MNI Thursday some of the fiscal windfall from building a more competitive economy and from higher energy royalties can help with immediate voter concerns around affordability, comments coming ahead of his April 28 budget update.

"People are concerned about the end of week, the end of the month, and therefore you need to build for the future. But at the same time you need to take care of the people where they are now. And now because of the additional revenue, we could take part of these additional revenues and say OK, we hear you," Francois-Philippe Champagne said in an interview. 

"We know it’s a more difficult period now, and we have always been with you, and therefore we’re going to use part of these revenues to give a targeted and temporary, as the IMF has called it, support to people who need it the most," he said.

Prime Minister Mark Carney earlier this week announced a federal gasoline sales tax holiday over the summer months, and Champagne didn't outline any specific actions that could follow. Economists at National Bank and Desjardins estimate higher prices for Canada's exported oil and gas will bring billions of extra dollars into the federal treasury. 

That also helps lower Canada's ratio of debt-to-GDP, according to those economist forecasts, even with pressures to spend more on consumer relief, defense and public works. Champagne declined to detail what will happen with his "fiscal anchor" of controlling the deficit relative to GDP but said the economy has been more resilient than many expected amid U.S. tariffs and the Iran conflict. 

BANK OF CANADA MANDATE

"When we presented Budget 2025 with the prime minister, we invested in growth enhancing assets. Housing, infrastructure, productivity and innovation, defense," Champagne said. "And what you’re seeing now is the dividend of that plan. What you see now is the fundamentals underlying the Canadian economy are very strong, despite the headwinds." (See: MNI: Canada Needs Bigger Push Than Commodity Boom-Ex-Ministers)

Investors are betting those positives aren't enough to prevent the Bank of Canada from lifting interest rates later this year to keep inflation in check. Asked if monetary tightening would be a political problem or hurt consumers, Champagne said inflation has been within the Bank's 1% to 3% target range for a while now. 

"Canada like any other country is not immune to the global impact that you’re seeing with the crisis in the Middle East in particular," he said. "But at the same time, we are going to play a role with fiscal policy, the Bank of Canada will play its role with monetary policy." (See: MNI INTERVIEW: BOC 'Straddling Both Sides' In Rate Hold-Stillo)

Bank Governor Tiff Macklem and Champagne later this year will renew the five-year policy mandate for the central bank. Some economists say the last renewal watered down the price goal by adding some language about the job market. (See: MNI INTERVIEW: Strip Job Language From BOC Mandate- Ex Fellow)

“We are going to review the mandate when the time comes,” Champagne said about the renewal. “What I’m very keen is to provide the stability and predictability that we have always had (with) successive governments with respect to the role of the Bank of Canada within the Canadian economy.”