'Low probability' the Carney government will hit any of its fiscal anchors, says budget watchdog
OTTAWA — Ottawa’s fiscal watchdog says there’s a “low probability” that the Carney government will reach any of the three targets that it has referred to as its fiscal anchors, just months after establishing those key long-term benchmarks.
Jason Jacques, the interim Parliamentary Budget Officer (PBO), told a parliamentary committee Thursday that there’s only a 7.5 per cent chance that the government, for example, will hit its target of reducing Canada’s deficit-to-gross domestic product (GDP) ratio over each of the next few years.
“Based on the analysis we’ve conducted, there is a low probability of respecting the fiscal anchors the government has set out for itself,” Jacques told the House of Commons’ Government Operations and Estimates Committee, following a question from Conservative MP Philip Lawrence.
The Carney government had earlier established three fiscal targets or anchors: balancing the operating budget within three years, a declining deficit-to-gross domestic product (GDP) ratio over the next few years and a declining debt-to-GDP ratio over the next few years.
The Carney government’s first budget, released on Nov. 4, dropped the third of those targets.
John Fragos, a spokesperson for Finance Minister François-Philippe Champagne, said the government’s plan is to cut operational areas such as the public service, while increasing spending in pro-growth investments such as infrastructure for the energy, AI and critical mineral industries.
“The government’s fiscal anchors reflect the balance between fiscal prudence and the macroeconomic reality,” Fragos said in a statement.
Jacques’s comments are the latest to criticize the Carney government’s fiscal policy in recent months. In his first few weeks on the job, Jacques has described the government’s spending as “stupefying,” “shocking” and “unsustainable.”
The PBO, an independent officer who scrutinizes government raising and spending of tax dollars, also criticized the federal government last week in a report for using an “overly expansive” definition of investments that will help the Carney government hit its first fiscal target. That move, the PBO said, shifts about $94 billion in daily spending over the next five years to the more palatable capital side of the ledger.
Capital spending includes many items that are physical assets such as infrastructure, housing, military equipment and even software that are often seen as “investments.” Some capital spending, such as spending on ports, rail and other transportation routes that are designed to make exports more efficient, can boost productivity and the economy.
Jacques’s report said the government’s inclusion of such items as corporate income tax expenditures, investment tax credits and operating subsidies should not be considered capital spending. “The government’s definition of capital investment is too broad.”
The Carney government’s first budget marked the first time that Ottawa separated capital and operational or day-to-day spending. The accounting move has its defenders, but critics say it could lead to more spending.
The Carney government’s first budget projected an average deficit of $64.3 billion between this fiscal year and 2029-30, more than double what was projected about a year ago in the 2024 fall economic statement.
The budget also forecast a deficit this year of $78.3 billion, the third-highest in Canadian history and the largest ever in a non-pandemic year. The Carney government’s forecast calls for modest dips in the annual deficit over each of the next four years, although the cumulative effect will be another $320 million of new debt before the end of the decade.
The federal government has now accumulated $1.27 trillion in debt, almost half of which has been added over the last five years. With the budget’s updated forecast for this fiscal year, Ottawa is now on pace to amass $593.1 billion in debt over that five-year span, or 46.7 per cent of the total debt accumulated in Canadian history.
The federal government also said this week that it intends to hire a permanent PBO. Jacques, a veteran of the PBO office, has been filling the position on an interim basis since September.
National Post
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