The Parliamentary Budget Officer (PBO) today released his assessment of the long-term sustainability of government finances. The assessment reflects all measures in federal, provincial and territorial government budgets in 2024.
The PBO’s 2024 Fiscal Sustainability Report finds that current fiscal policy, if maintained over the long term, is sustainable for the government sector as a whole, that is the federal and subnational governments and public pension plans combined.
We now estimate the federal fiscal room to be 1.5% of GDP, down from our previous estimate of 1.7% of GDP. This adjustment is due to increased program spending that more than offsets higher revenues, along with an upward revision to the effective interest rate, which reduces the fiscal room available. This fiscal room does not include the potential impact of other financial pressures such as increasing defence spending or government commitments that are yet to be reflected in budgetary documents.
Relative to the size of the Canadian economy, total general government net debt is projected to decline steadily over the long term due to fiscal room at the federal level and to rising net asset positions in the public pension plans.
In addition to the federal government, the PBO finds that governments in the provinces of Quebec, Saskatchewan, Nova Scotia, Ontario and Alberta, all have fiscal room to reduce taxes or increase spending.
“Although we saw a record population growth in 2023, we must bear in mind that many Canadians will be retiring from their peak working years, resulting in slower workforce and GDP growth. This aging population will put upward financial pressure on government programs such as health care, Old Age Security and public pension benefits,” explains Yves Giroux, PBO.
Our report assesses the Canada Pension Plan (CPP) and Quebec Pension Plan (QPP) and finds, however, that both plans are sustainable over the long term. Given benefits projected under the current plans’ structure, status quo contribution rates are sufficient to ensure that the net asset-to-GDP position of each plan is above its 2023 value after 75 years.
The PBO’s Fiscal Sustainability Report is designed to identify whether changes in current fiscal policy are necessary to avoid unsustainable growth of government debt and estimate the magnitude of those changes using the fiscal gap.
A search tool, FSR At-a-Glance, is available to visualize and summarize key drivers of fiscal sustainability for each province and territory over the long term.