Fiscal Sustainability Report 2022

Highlights

• From the perspective of the total general government sector, that is federal and subnational governments and public pension plans combined, current fiscal policy in Canada is sustainable over the long term. Relative to the size of the Canadian economy, total general government net debt is projected to decline steadily over the long term primarily due to fiscal room at the federal level.

• Current fiscal policy at the federal level is sustainable over the long term. We estimate that the federal government could permanently increase spending or reduce taxes by 1.8 per cent of GDP ($45 billion in current dollars, growing in line with GDP thereafter) while maintaining fiscal sustainability.

• For provincial-territorial, local and Indigenous governments, current fiscal policy is not sustainable over the long term—albeit to a modest extent. We estimate that permanent tax increases or spending reductions amounting to 0.1 per cent of GDP would be required to achieve fiscal sustainability over the long term.

• The current structure of the Canada Pension Plan (CPP) and Quebec Pension Plan (QPP) is sustainable over the long term. Under the current structure of the plans, projected contributions and benefits are sufficient to ensure that the net asset-to-GDP position is at or above its 2021 value after 75 years.

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Communications

Quotes

• Assuming no major new spending initiatives, we project the total government debt-to-GDP ratio to decline steadily over the long term largely due to the fiscal room at the federal level. The federal flexibility reflects elevated revenues as well as spending on programs that will gradually decline over the long term relative to the size of the economy.

• Healthcare spending will continue to outpace growth in the economy as the population ages. In most jurisdictions, the Canada Health Transfer will not keep pace with rising healthcare spending and growth in social spending will exceed increases in the Canada Social Transfer.

Infographic

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News Release

{"id":37,"created_at":"2022-07-26T14:26:17-04:00","updated_at":"2022-07-28T09:28:46-04:00","slug":"fiscal-sustainability-report-2022-pbo-finds-that-fiscal-policy-for-canadas-government-sector-is-sustainable-rapport-sur-la-viabilite-financiere-de-2022-le-dpb-estime-que-la-politique-financiere-du-secteur-gouvernemental-canadien-est-viable","title_en":"Fiscal Sustainability Report 2022: PBO finds that fiscal policy for Canada\u2019s government sector is sustainable","title_fr":"Rapport sur la viabilit\u00e9 financi\u00e8re de 2022 : le DPB estime que la politique financi\u00e8re du secteur gouvernemental canadien est viable","body_en":"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 2022.\n\nThe PBO\u2019s [2022 Fiscal Sustainability Report](https:\/\/www.pbo-dpb.ca\/en\/publications\/RP-2223-012-S--fiscal-sustainability-report-2022--rapport-viabilite-financiere-2022) finds that current fiscal policy, if maintained over the long term, is sustainable for the government sector as a whole. Relative to the size of the Canadian economy, total general government net debt is projected to remain below its 2021 level over the long term under status quo fiscal policy.\n\n\u201cAssuming no major new spending initiatives, we project the total government debt-to-GDP ratio to decline steadily over the long term largely due to the fiscal room at the federal level\u201d, says Yves Giroux, PBO. \u201cThe federal flexibility reflects elevated revenues as well as spending on programs that will gradually decline over the long term relative to the size of the economy.\u201d\n\nBased on the PBO\u2019s latest assessment, in addition to the federal government, governments in the provinces of Quebec, Alberta, Saskatchewan and Nova Scotia, all have some fiscal room to reduce taxes or increase spending. Status quo fiscal policy is not sustainable in the remaining provinces and the territories due in part to an ageing population.\n\n\u201cHealthcare spending will continue to outpace growth in the economy as the population ages,\u201d adds Mr. Giroux. \u201cIn most jurisdictions, the Canada Health Transfer will not keep pace with rising healthcare spending and growth in social spending will exceed increases in the Canada Social Transfer.\u201d\n\nThe report also assesses the Canada Pension Plan and Quebec Pension Plan and finds that both plans are sustainable over the long term. Given benefits projected under the current plans\u2019 structure, status quo contribution rates are sufficient to ensure that the net asset-to-GDP position of each plan is at or above its 2021 value over the long term.\n\nThe PBO\u2019s 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.","body_fr":"Le directeur parlementaire du budget a publi\u00e9 aujourd\u2019hui son \u00e9valuation de la viabilit\u00e9 \u00e0 long terme des finances gouvernementales. Cette \u00e9valuation tient compte de toutes les mesures figurant dans les budgets f\u00e9d\u00e9raux, provinciaux et territoriaux de 2022.\n\nLe [Rapport sur la viabilit\u00e9 financi\u00e8re de 2022](https:\/\/www.pbo-dpb.ca\/fr\/publications\/RP-2223-012-S--fiscal-sustainability-report-2022--rapport-viabilite-financiere-2022) conclut que, si elle est maintenue telle quelle, la politique financi\u00e8re actuelle devrait \u00eatre viable dans l\u2019ensemble du secteur gouvernemental. Proportionnellement \u00e0 la taille de l\u2019\u00e9conomie canadienne, la dette nette totale des gouvernements devrait demeurer en de\u00e7\u00e0 du niveau de 2021 si la politique financi\u00e8re demeure inchang\u00e9e \u00e0 long terme.\n\n\u00ab En l\u2019absence de nouvelles d\u00e9penses majeures, nous pr\u00e9voyons que le ratio entre le PIB et la dette gouvernementale totale devrait diminuer de fa\u00e7on constante \u00e0 long terme, principalement parce que le gouvernement f\u00e9d\u00e9ral dispose d\u2019une bonne marge de man\u0153uvre, affirme le directeur parlementaire du budget, Yves Giroux. Cette marge de man\u0153uvre s\u2019explique par le fait que les recettes cro\u00eetront et que les d\u00e9penses consacr\u00e9es aux programmes seront de moins en moins importantes par rapport \u00e0 la taille de l\u2019\u00e9conomie. \u00bb\n\nSelon la plus r\u00e9cente \u00e9valuation du directeur parlementaire du budget, outre le f\u00e9d\u00e9ral, le Qu\u00e9bec, l\u2019Alberta, la Saskatchewan et la Nouvelle-\u00c9cosse ont tous la marge de man\u0153uvre n\u00e9cessaire pour augmenter leurs d\u00e9penses ou r\u00e9duire les imp\u00f4ts. Dans le reste des provinces et des territoires, le statu quo financier n\u2019est pas viable \u00e0 long terme, entre autres en raison du vieillissement de la population.\n\n\u00ab Les d\u00e9penses en sant\u00e9 continueront de cro\u00eetre plus vite que l\u2019\u00e9conomie au fur et \u00e0 mesure que la population prendra de l\u2019\u00e2ge, ajoute M. Giroux. Dans la plupart des provinces et des territoires, le Transfert canadien en mati\u00e8re de sant\u00e9 ne cro\u00eetra pas au m\u00eame rythme que ces m\u00eames d\u00e9penses, et la hausse des d\u00e9penses sociales d\u00e9passera elle aussi l\u2019augmentation du Transfert social canadien. \u00bb\n\nLe rapport du directeur parlementaire du budget s\u2019int\u00e9resse aussi au R\u00e9gime de pensions du Canada et au R\u00e9gime de rentes du Qu\u00e9bec. Il conclut que les deux sont viables \u00e0 long terme. \u00c0 la lumi\u00e8re des projections actuelles et de la structure des deux r\u00e9gimes, les taux de cotisation actuels devraient suffire pour que le ratio des actifs nets de chacun par rapport au PIB demeure encore longtemps \u00e0 un niveau \u00e9gal ou sup\u00e9rieur \u00e0 leur valeur de 2021.\n\nLe Rapport sur la viabilit\u00e9 financi\u00e8re du directeur parlementaire du budget sert \u00e0 d\u00e9terminer si des changements doivent \u00eatre apport\u00e9s \u00e0 la politique financi\u00e8re afin d\u2019\u00e9viter que la dette gouvernementale ne croisse de mani\u00e8re insoutenable, et \u00e0 estimer l\u2019ampleur des changements \u00e0 apporter \u00e0 la lumi\u00e8re du d\u00e9s\u00e9quilibre financier.","release_date":"2022-07-28T09:00:00-04:00","is_published":"2022-07-28T08:57:11-04:00","internal_id":"COM-2223-037","permalinks":{"en":{"website":"https:\/\/www.pbo-dpb.ca\/en\/blog\/news-releases--communiques-de-presse\/fiscal-sustainability-report-2022-pbo-finds-that-fiscal-policy-for-canadas-government-sector-is-sustainable-rapport-sur-la-viabilite-financiere-de-2022-le-dpb-estime-que-la-politique-financiere-du-secteur-gouvernemental-canadien-est-viable"},"fr":{"website":"https:\/\/www.pbo-dpb.ca\/fr\/blog\/news-releases--communiques-de-presse\/fiscal-sustainability-report-2022-pbo-finds-that-fiscal-policy-for-canadas-government-sector-is-sustainable-rapport-sur-la-viabilite-financiere-de-2022-le-dpb-estime-que-la-politique-financiere-du-secteur-gouvernemental-canadien-est-viable"}},"pivot":{"publication_id":699,"news_release_id":37}}