Tip 1: To deconstruct the budget, first consider its construction:
Fundamentally, this is an exercise in assembling the evidence that best supports the government’s narrative, not necessarily to provide a comprehensive, objective view of the economy or the fiscal situation.
And before the budget is released, reflect on your role and that of your organization. What’s your unique interest and perspective?
Tip 3: Numbers can tell you more than narratives
When you finally get the budget document, have a quick glance through summary texts like the press release or minister’s speech to identify the government’s main story lines.
Then stop reading and dive into the numbers.
First stop: The economic survey
Finance Canada’s survey of private sector forecasters forms the economic basis for the government’s budget projection.
The most important indicator is the level of nominal GDP — and specifically how it’s changed since the last time.
Second stop: New fiscal measures
Here's the story will largely be about the government's COVID response to-date, and how they plan to allocate additional resources.
Third stop: The budgetary balance table.
By making this your third stop, you'll better understand how the economy is shaping up and how much new programs will cost and when they will occur.
That makes it much easier to changes in the government’s bottom line since last time.
Tip 4: Budget numbers are forward-looking forecasts
Revenues and spending numbers are estimates of what the government is planning for.
Be humble about what we can know about the future, and mindful of this unavoidable uncertainty before making overly strong pronouncements.
Tip 5: See the big picture
Try not to get caught up in the minutiae of annual changes; rather, keep a long-term perspective.
Compare recent results and projections by looking back over history.
...Stay tuned for some excellent budget coverage in the coming days:
...What do you think of Canada’s federal #Budget2021 proposal to introduce a new tax on luxury goods such as yachts, personal aircraft and expensive cars?
...Our goal in this paper was to analyze the potential to increase Canada’s exports and foreign direct investment abroad.
To do so, we constructed a unique administrative dataset @StatCan_eng with detailed information for millions of firms that operated in Canada from 2010-15.
...Our big research challenge: how do you identify “potential” exporters?
In the past, people surveyed firms to ask if they could become future exporters.
But you might worry that approach may be unreliable, if some firms say “yes”, even if they aren’t serious exporters.
Almost there: EDC's Canadian Economy Recovery Tracker (CERT) is showing significant recent progress, driven by big improvements in COVID cases and loosening government restrictions edc.ca/en/guide/edc-c…#CdnEcon
...Here are the COVID indicators, which are looking much, much better than in May.
...The Canadian price of oil continues to climb higher.
Our survey corroborates other indicators for May, which suggest the Canadian economy has turned the corner—tentatively emerging from the worst of the global pandemic, and taking the first steps on road to recovery.
...Business re-openings are slowly proceeding, in a tentative phased-in approach (although many are still operating well below capacity).
Of the 54% of respondents who had closed their physical store locations:
I've heard this refrain a lot in the lat few weeks.
It's too hard to forecast right now, so we won't attempt to do so.
What do you think?
...As someone who has spent many years forecasting, this reaction strikes me as incredible --- especially among forecasters.
Of course any point forecast will be wrong, it was also so.
...But one key point of a forecast --- is *the exercise* of doing the forecast.
It forces you to sit down, as a collective team, reflect, educate yourself on recent developments and importantly use data, analysis and modelling to quantify a complicated and uncertain world.