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The federal budget watchdog says the books are already balanced but that tens of billions of dollars in expected surpluses will be largely wiped out by new tax breaks, lower oil prices and reduced EI premiums — possibly leading to small deficits within two years.

The Parliamentary Budget Office, in a new report released Friday, says the government’s decision to freeze EI premium rates for the next two years at higher-than-necessary levels “continues to be a concern” and is effectively providing much of the fiscal breathing room to offer billions of dollars in tax breaks.

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The budget office also projects the government’s recent sale of the rest of its General Motors shares will contribute about $2.2 billion in total toward a balanced budget in the new 2015-16 fiscal year.

Based on the current fiscal situation, before any potential new measures are announced in Finance Minister Joe Oliver’s budget on Tuesday, the federal government will post a $3.4 billion surplus in the 2014-15 fiscal year that ended March 31 and a small $1.3 billion surplus for the new 2015-16 year, the PBO says.