OTTAWA - Canada's budget watchdog says the country is on track to run a $3.6-billion surplus in 2014-15 — which would balance the books a year ahead of government predictions.
But the Parliamentary Budget Officer is urging Ottawa to proceed with caution when deciding whether to use surplus cash to introduce spending initiatives or to bring permanent tax relief.
If not, the PBO says the government risks falling back into deficit once economic growth slows.
In its latest economic and fiscal outlook, the budget office predicts balanced budgets through 2019-20 when it says the federal surplus will reach as high as $11.3 billion.
The report says Canada's real GDP was stronger than expected and projects further growth thanks to the improving U.S. economy.
Its projection is at odds with Prime Minister Stephen Harper, who has insisted there won't be a federal surplus until the 2015-16 fiscal year.
The Harper government has made promises to introduce tax cuts ahead of next year's election — relief contingent on a balanced budget.
The pledges include income splitting for couples with children under 18 and a doubling of the annual limits for tax-free savings accounts.
Earlier this month, Harper said last year's federal deficit — for 2013-14 — would be more than $10 billion smaller than forecast, but he's refused to predict the improving bottom line will bring balanced books this fiscal year.
He announced a new $5.2-billion deficit figure for 2013-14 — down from the $16.6 billion shortfall projected in February's federal budget.
Economists and budget watchers had already calculated that Ottawa might be headed to a surplus this fiscal year, which ends next March 31, before the prime minister's announcement.
Last month, former senior Finance Department bureaucrats Scott Clark and Peter DeVries published a report that found Ottawa heading for a $4 billion surplus, which did not include a $3-billion "risk adjustment" cushion built into the 2014 federal budget. They based their estimates on last year's deficit falling to about $10 billion.
