There were really no surprises in Finance Minister Paul Martin’s economic outlook today concludes a report from BMO Nesbitt Burns.

Martin noted that the economic slowdown and announced spending increases have knocked back projected surpluses, but not dramatically. He also revealed that last year’s budget surplus was at least $15 billion. “Ottawa’s finances are not immune to the slowdown, but Martin has left enough safety trap-doors to keep the surplus intact, unless there is a prolonged recession. However, it is also likely that last year’s $15 billion surplus will prove to be the high-water mark,” notes BMO Nesbitt Burns.

Finance’s budget surplus projections are now based on a private sector GDP forecast of 2.4% this year and 3.4% in 2002, compared with 3.5% and 3.0% respectively. BMO Nesbitt Burns is a bit more cautious predicting just 2.1% this year and 3% in 2002. And while Ottawa believes this year’s budget surplus will by $7.2 billion and $7.3 billion next year, BMO notes that, “To what extent any of these surpluses will be used to pay down debt by more than $3 billion will be determined in the fall update.”

The Canadian Association of Insurance and Financial Advisors says it applauds the federal government on its commitment to dedicate at least $15 billion to debt reduction. “The national debt has been a burden on the backs of Canadians for far too long,” said CAIFA president Dave Thibaudeau. “This $15 billion reduction is a major step in creating an economic and social environment where Canadians can enjoy the best quality of life and standard of living,” he added.

Martin also announced that it has agreed with the Bank of Canada to extend the existing inflation targets of 1%-to-3% for the next five years. “While core inflation remains comfortably in the mid-point of the range, it is notable that the target was reaffirmed on a day that headline inflation hit its highest level in a decade at 3.6% in April,” notes BMO.