“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,” the news release said.
For the federal sector specifically, the report said the PBO estimates that “the federal government could permanently increase spending or reduce taxes by 1.7 percent of GDP ($49.5 billion in current dollars, growing in line with GDP thereafter) while maintaining fiscal sustainability.”
However, the report said only five provinces—Quebec, Saskatchewan, Nova Scotia, New Brunswick, and Alberta—have fiscal room to increase spending or cut taxes while maintaining fiscal sustainability. Current fiscal policy is not sustainable in the remaining provinces and territories.
Regarding the country’s public pension plans, Mr. Giroux said “Canada’s aging population will result in more and more Canadians transitioning into their retirement years.”
“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.”
However, his report says the current structure of the Canada Pension Plan (CPP) and Quebec Pension Plan (QPP) is sustainable over the long term.
The contributions and benefits projected under the current structure of the plans “are sufficient to ensure that the net asset-to-GDP position is above its 2022 value after 75 years,” the report said.
“Part of this increase is due to the large budget deficits governments ran during the pandemic. However, nearly 60 percent of the run-up in debt occurred before COVID. In other words, this is not a new problem,” the institute said.
