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 2023.
The PBO’s 2023 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.
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, New Brunswick and Alberta, all have fiscal room to reduce taxes or increase spending.
“Canada’s ageing population will result in more and more Canadians transitioning into their retirement years,” adds Mr. Giroux. “This will lead to slower growth in the economy and government revenues. At the same time, population ageing will put financial pressure on government programs such as health care, Old Age Security and public pensions.”
The report also assesses the Canada Pension Plan (CPP) and Quebec Pension Plan (QPP) and finds that both plans are sustainable. 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 2022 value over the long term.
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.