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Premier François Legault’s government presented an economic update Thursday featuring a $4-billion surplus for 2019-20 on top of a revised surplus of $8.3-billion for 2018-19.Jacques Boissinot/The Canadian Press

Quebec is set to post massive back-to-back surpluses boosted by a strong economy, and is increasing spending as public finances tighten elsewhere in Canada.

Premier François Legault’s government presented an economic update Thursday featuring a $4-billion surplus for 2019-20 on top of a revised surplus of $8.3-billion for 2018-19. Finance Minister Éric Girard announced that he will boost spending by $857-million and put $6.2-billion from the surpluses into a debt-repayment fund.

The financial results contrast with the grim picture in other provinces. In October, Alberta cut $1.3-billion in spending on its way to an $8.7-billion deficit after five years of economic malaise driven by low oil prices. Ontario also cut spending in its budget last spring. In its latest economic update Wednesday, Ontario projected a deficit of $9-billion for this budget year.

Quebec’s economy, meanwhile, is expected to grow by 2.4 per cent in 2019, up from the 1.8 per cent projected last spring, the third consecutive year of strong economic growth. The national average for projected 2019 economic growth is 1.6 per cent.

“The Quebec economy is performing remarkably well, even as the global economy is slowing down,” Mr. Girard said. “This allows us to move up on several of our promises and still manage public finances responsibly.”

The good news allowed Mr. Legault’s government to send $857-million back to taxpayers. Mr. Girard announced two key measures to boost child allowances and to return the province’s subsidized public daycare system to a single flat rate immediately, amounting to about $2,000-a-year in savings for the average family. The government promised the family policies in the 2018 election, but accelerated implementation because of the surpluses.

Quebec’s public daycare system will return to a flat fee of $8.25 a day – a rate that makes the system the envy of parents in the rest of Canada. In 2015, a previous Liberal government introduced a surcharge of up to $15 a day, based on parents’ income, that was collected at tax time.

The government will also cap parking fees at hospitals at $10 a day – less than half the current rate at many urban hospitals – a measure that will cost about $120-million next year.

Quebec has not had such large surpluses in its modern accounting history. The province has posted surpluses of up to $2.6-billion since 2015-16, and much smaller amounts in the late 1990s and early 2000s. Before 1998, the province experienced chronic deficits going back into the 1960s.

However, the news isn’t all sunny on the horizon for Quebec’s public finances. The province’s population is still aging more rapidly than those in other provinces, outside the Atlantic. Unemployment is low but a shrinking work force is partly responsible for the tight labour market and rising wages. Despite the solid economy and strong public finances, Quebec still stubbornly lags behind Ontario in productivity growth and standard of living.

Economists and bank analysts say the government may not be doing enough to plan for Quebec’s economy joining the global slowdown. In a report earlier this year, economists Luc Godbout and Julie St-Cerny-Gosselin wrote that Quebec will fall into deficit quickly when the economy returns to normal levels of growth.

Matthieu Arseneau of National Bank Financial said the province’s economy may be overheating and should be running even bigger surpluses in preparation for rainy days instead of taking on new, recurring expenses.

Mr. Arseneau said Quebec “avoided the contagion” of low energy prices that struck Alberta, and is instead benefiting economically from low fuel prices and interest rates, which are keeping the Canadian dollar weak and benefiting Quebec exports.

Carlos Leitao, a former bank economist and the Liberal finance minister from 2014 to 2018 who balanced Quebec’s books after decades of deficit, said the update was disappointing. “The economy is slowing down, exports are decelerating, private investment is slowing down,” said Mr. Leitao, who is now opposition finance critic. “These are things that Mr. Legault described as his primary mission.”

Mr. Leitao added that while “the government is in spending mode, at the same time, its spending is relatively well targeted.”

Mr. Girard, the Finance Minister, said the government’s plan leaves enough surplus in place to counter any economic headwinds. “We’re only spending 33 per cent of the surplus. We’re being reasonable and responsible,” he said, adding that the money the government returned to Quebec parents will be good for economic growth.

Mr. Legault was buoyant as he arrived at the National Assembly, saying the economic update was “the cherry on the sundae” for his government.

Mr. Legault aims to get Quebec off federal equalization payments one day but, as long as the province lags behind in productivity and standard of living, that day remains beyond the horizon. The province will receive $13.1-billion in equalization this year, a figure expected to remain stable into 2022.

Editor’s note: (Nov. 8, 2019): An earlier version of this article included an incorrect surname for economist Julie St-Cerny-Gosselin.

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