Invariably, every new Minister of Finance wants you to put out something positive, because you don't want to depress markets. With over 30 years of experience, I've come to see that the only way is to do the best forecast you possibly can, and whether that's viewed as pessimistic or realistic, that's the way you go.
The history of the making of this budget follows a tradition that Paul Martin started in 1994. The normal procedure is to base it on the average of the private sector forecast, so as is usual, a month before the fall update, the Department of Finance did a survey of the private sector forecasts.
I'll refer to nominal GDP because that's the key economic variable. The average of the private sector forecast was 1.9% growth in 2009. At that moment I was sitting with a decline of 3.2%. Just to give you an element of what we're talking about, the difference between my forecast and the average would have been $15 billion on the federal deficit, so it was a huge range of uncertainty. I was aghast. I thought that 1.9% was totally inappropriate as the basis of a budget.
During the course of the discussions it was agreed that the update assumptions would be held open for another week to see if anybody wanted to lower any forecasts, and indeed, if you look in the fall update, instead of the 1.9%, it was 0.8%.
Then when Finance came in mid-January to do their last survey, the average nominal GDP forecast in the private sector was a decline of 1.5%, and again I didn't believe that. I didn't have the impression that officials at the Department of Finance believed that, and I was urging them.... You know, you're not locked into this pattern of using the average of the private sector. In fact, in one of the budgets that Ralph Goodale did, they broke that mould as well: when they were troubled by the average in the private sector, they adjusted it.
I said, “Do that. Do your own. Knock it down; otherwise, you're just going to have to come and revise it and you're going to look silly on the budget forecast.” To their credit, instead of using that average of a decline of 1.5%, they used 2.6%. It still wasn't down as low as mine, and my current forecast for the decline in nominal GDP is 4.5%, which is why I have this $18 billion higher deficit.
I think Finance and the minister and the budget did the right thing in January by not getting locked into this pattern of using the average of the private sector. I just wish they had gone with a number that was even lower.