Deficit shrank last December on increased tax revenues
Canada was able to reduce its budget deficit to 17.69 billion from 27.37 billion during the first nine months of the 2011-2012 fiscal year. The reduction was achieved partly through higher tax revenues.
In December there was a 6.8 per cent jump in government revenues. As a result the deficit declined to 353 million compared to 1.35 billion in 2010.
Revenues rose a full 4.2 per cent over the first nine months of this fiscal year. Tax revenues accounted for most of the increase. But program expenses also declined by 1.8 per cent.
The Conservative government originally said it would eliminate the deficit by 2014-15 but not has moved the date to 2015-2016. This is probably a wise move as more severe cutbacks could cause the economy to go back into recession. The government predicts that in 2011-12 the deficit will be 31 billion but this is probably too high. Keeping the larger figure will allow the Conservatives to claim cutbacks that will be made in programs are needed because of the deficit. For more see this BNN article.