The Canadian Taxpayers Federation released a report today showing the federal government won’t balance the budget until 2041, based on data published by the Parliamentary Budget Officer.
“The good news is that the feds are now expected to balance the budget in 2041, which is about three decades sooner than the last PBO projection,” said Franco Terrazzano, Federal Director of the CTF. “But taking another two decades to balance the budget is too long and even that target won’t be met if interest rates tick up, the economy doesn’t grow every single year or politicians can’t find the willpower to say no to new spending.”
Last year, the CTF used supplementary data from the PBO’s fiscal sustainability report to show that the feds wouldn’t balance the budget until 2070.
The supplementary data for this year’s PBO report shows the feds won’t balance the budget until 2041 based on the trajectory of Budget 2022. Debt interest charges will have cost taxpayers $802 billion by the time the government balances the budget.
The federal government needs the following conditions to materialize to balance the budget by 2041:
Uninterrupted nominal GDP growth of four per cent per year and steady real GDP growth of two per cent per year;
Average annual interest rate of 2.5 per cent, which is lower than interest rates were any year between 1991 and 2015. The current effective interest rate charged on the government’s debt is 1.7 per cent. But, the Bank of Canada just issued the largest one-time interest rate hike since August 1998, putting Canada’s benchmark borrowing rate at 2.5 per cent; and,
No new spending announcements beyond what is included in Budget 2022.
When campaigning to be prime minister, Justin Trudeau initially said he would run a few “modest” deficits before returning to a balanced budget in 2019. The government was set to miss that balanced budget by $20 billion even before the pandemic.
“By the time the feds balance the budget two decades from now, interest charges on the government credit card will have cost taxpayers more than $800 billion,” said Terrazzano. “Taxpayers have every right to be skeptical that this government can exercise enough restraint to balance the books by 2041.”
You can find the CTF’s report based on the PBO's data here.
You can download the excel sheet containing the PBO’s supplementary data with CTF calculations here.