AltAusterity Digest #89 March 7-13, 2019

According to data analyzed by Reuters, it is unlikely that the Bank of Canada will cut interest rates as long as job growth continues close to its current pace. The Canadian economy has slowed down since the end of 2018 and this dip in growth is expected to continue throughout the first half of 2019. According to Reuters’ analysis, the pace of job growth has in recent history been a better predictor of interest rate changes than variations in economic growth. Although the two measures are typically tied together, on the last two occasions when they have been divergent, in 2006 and 2012, the bank has chosen not to cut rates.

After years of austerity and successive budget surpluses, Sweden’s government debt may fall below the lower debt threshold in 2021. According to Swedish fiscal rules, any deviation of more than 5% from the 35% of debt-to-GDP “anchor” requires an explanation to parliament. Andrea Wallstrom, an economist at Swedbank AB explained that the government will have to explain why there are not spending enough and “propose a way out of this insanity.” The Social Democratic-led government has chosen a path of tight fiscal policy despite unemployment remaining below target, and little threat of inflation.

The Trump administration’s 2020 budget looks to be setting up a major funding fight again in Congress. Proposed changes to funding in Trump’s budget include a 31% decrease to the Environmental Protection Agency, a 24% cut to the Department of State and USAID, a 19% cut to Transportation, and a host of other decreases in funding for housing, health, education, energy, labour, justice and the treasury. Additions include an extra $33 billion for defense, bringing its total to $718 billion, and $8.6 billion to build sections of the U.S.-Mexico border wall, on top of the almost $7 Trump already announced in his national emergency declaration.

On Wednesday, Britain’s chancellor of the Exchequer, Philip Hammond, delivered his spring statement on the national economy. His main message was that the only way he can deliver more funds for public spending is if the British Parliament reaches a deal on Brexit. Hammond pledged to increase the Brexit dividend to 26.6 billion pounds a day after lawmakers emphatically rejected PM Theresa May’s exit plans. Regarding the increased public spending, analysts were quick to point out that the government has been making anti-austerity promises for some time now, but that the promised changes to funding have yet to materialize.

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