An independent watchdog has stated that Canada’s government spending is on an unsustainable path.
On Tuesday, the Parliamentary Budget Officer (PBO) said that Prime Minister Justin Trudeau has depleted some of the federal government’s room for new spending and tax cuts that could be succeeded while keeping the current debt-to-GDP ratio.
Canada’s provinces and other sub-national governments are struggling. A drop in commodities and increasing health-care spending has degraded their already unsustainable outlook.
Last year, total government sustainability was net even. This year it is a negative 0.6 percent of gross domestic product (roughly $11 billion in unsustainable spending every year).
The PBO's fiscal sustainability report discovered that the federal government still has space for new spending or tax cuts adding up to 0.9 percent of GDP, after Trudeau delivered a budget that includes $118.6 billion in cumulative deficits over six years. This total is down from 1.4 percent of GDP in 2015 and amounts to room for $19.2 billion in new spending or tax cuts.
Read the June 2016 issue of Business Review USA & Canada magazine