The federal government broke its key fiscal guardrail and posted a deficit of $61.9 billion for the 2023-2024 fiscal year, according to the fall economic statement released on Monday, blowing past the $40.1 billion level at which it promised to keep the deficit.

The Liberal government is also projected to go beyond the $40.1-billion guardrail for the next two fiscal years, with a deficit projection of $48.3 billion in 2024-2025 and $42.2 billion in 2025-2026, higher than what was forecast in the budget last spring. The federal government is on track to stick to one of its fiscal guardrails, with the debt-to-GDP ratio set to be 42.1 per cent for 2023-2024 and decline to 41.9 per cent the following year.

The fall economic statement was tabled by the government house leader Karina Gould after Chrystia Freeland resigned as finance minister earlier in the day. In a letter addressed to Prime Minister Justin Trudeau,, she said she had been at odds with the prime minister for weeks over “the best path forward for Canada.”

The economic update detailed $23.3 billion in new spending over the next six years.

Department of finance officials said the deficit was $21.8 billion higher than expected for 2023-2024 due exceptional factors. Those included future payments to compensate First Nations children and families who faced discrimination under the First Nations Child and Family Services program and under Jordan’s principle. The government previously set aside nearly $23.3 billion for compensation. The second factor is money that still hasn’t been recovered under the Covid-19 pandemic support programs. The higher-than-anticipated provision for these two categories accounted for $21.1 billion in accounting charges.

The statement projects the economy will grow by 1.3 per cent in 2024 and 1.7 per cent in 2025. Tax revenues for 2023-2024 are expected to be $5.5 billion below the spring budget’s projection, due lower tax revenue consistent with a softening economy.

The most significant investments introduced in the fall economic statement include renewing the Accelerated Investment Incentive, to make Canada’s corporate tax system more competitive.

The incentive was first introduced by former finance minister Bill Morneau in 2018 after competitiveness concerns after Donald Trump was first elected U.S. president. The re-upping of these incentives will cost the federal government an estimated $17.4 billion over the next six years. They will slowly be phased down starting in 2030 to 2033.