OTTAWA - The federal government is on track to amass another impressive surplus this year, perhaps larger than anyone thought possible amid a slowing economy.
The Finance Department reported Friday the government took in $1.7 billion more than it spent in July, bringing the surplus for the first four months of this fiscal year to $2.9 billion.
That is already above the $2.3 billion Finance Minister Jim Flaherty had projected for the entire fiscal year that ends next March 31.
The April-May surplus was achieved at a time when the Canadian economy noticeably slowed to a crawl and government revenues were being shaved by the one-point reduction in the GST and new personal and corporate tax reductions announced last fall.
But the first half of 2008 also saw prices for commodities such as oil rise to record levels, bringing wealth into the country, spurring job growth, and pumping up corporate profits.
Flaherty has repeatedly insisted Ottawa is not headed for a deficit despite the slowing economy because of the wealth effects of commodity sales, which has inflated the value of what Canadians produce if not the quantity.
Still, the year-to-date surplus pales compared to last year at this time when Ottawa was $6.7 billion in the black and on its way to a $10 billion surplus for the entire fiscal year.
The July surplus was driven by continuing higher tax receipts from individuals, likely reflecting the growing labour force during the period and rising salaries.
The department said revenues were up $1.7 billion in July, or 8.4 per cent. Personal income tax revenues rose 8.5 per cent, while corporate tax revenues ballooned to 15.7 per cent.
Meanwhile, program spending increased $1.1 billion, or 6.9 per cent.
For the April-July period, revenues were up 0.7 per cent, while program expenses rose $4.9 billion, or eight per cent.
"Monthly program spending growth will initially be higher this year but should moderate by mid-year," the department said.
"This reflects the fact that program spending in the early months of 2007-08 was low, then rose in the second half of the year."
The reduction in revenues were almost totally due to the GST cut as revenues from the federal sales tax dropped $1 billion, or 9.6 per cent
The government also saved $500 million in the cost of servicing the national debt in the April-July period.
