OTTAWA-
The Parliamentary Budget Officer says Canada’s current fiscal policy is sustainable over the long term.
The PBO’s latest financial sustainability report finds that Canada’s overall debt level is expected to decline steadily over time.
At the federal level, the report says, the government could permanently increase spending or cut taxes by 1.8% of GDP and remain financially sustainable. This represents $45 billion in current dollars.
“It’s generally pretty good news overall, for Canada’s financial outlook,” said Randall Bartlett, director of the Canadian economy at Desjardins.
The annual report aims to identify the necessary changes to current fiscal policy to ensure that the accumulation of public debt does not become unsustainable.
To do this, it assesses the net debt/GDP ratio.
The Parliamentary Budget Officer’s assessment includes the federal and provincial spring budgets.
In his assessment of provincial, territorial, Indigenous and local governments, he warns that some governments’ tax policies are unsustainable.
The report indicates that over the long term, relative to the size of their economy, provinces will face increased health care spending due to aging populations.
However, most provinces have seen their financial situation improve since last year.
“1/8 is arguably 3/8 a pretty substantial improvement,” Bartlett said.
The report says fiscal policy in Quebec, Alberta, Saskatchewan and Nova Scotia is sustainable, while other provinces and territories would need to cut spending or raise taxes to achieve fiscal sustainability over time.
Bartlett said he was most surprised by the improved fiscal situation in Alberta and Saskatchewan, noting the changes are likely the result of rising oil prices.
The report also highlights how Canada’s aging population will affect economic prospects, with growth expected to slow as the proportion of Canadians retiring increases.
Bartlett said population decline in Canada is “inevitable”, but some of the decline is offset by improving immigration levels.
“There is a kind of pan-partisan agreement, among the main parties anyway, that immigration is necessary to support long-term economic growth in Canada and to offset the aging population we have here” , did he declare.
The report also assessed the Canada Pension Plan and the Quebec Pension Plan and concluded that their structures were sustainable over the long term.
This report from The Canadian Press was first published on July 28, 2022.
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