A New Federal Fiscal Framework for Canada
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The Trudeau government’s tenure has been characterized by uninterrupted budgetary deficits and substantial debt accumulation. The size of the federal deficit rose for five consecutive years after the government took office in 2015 (Canada, Department of Finance, 2023a). From 2015/16 to 2019/20, the federal government recorded cumulative deficits amounting to $94.1 billion. During the pandemic, the annual deficit then skyrocketed.
The federal government recorded a $327.7 billion deficit in 2020/21 and followed it up with another shortfall of $90.3 billion in 2021/22.
In subsequent years, when the effects of the pandemic had subsided, the government continued to run discretionary deficits equaling $35.3 billion in 2022/23 and $40.0 billion in 2023/24 (Canada, Department of Finance, 2023a; 2024). Further annual deficits averaging $31.3 billion are planned until at least 2028/29. These forecasted deficits are about $12.4 billion larger than the annual average recorded in the five years leading up to the pandemic,
- Poor government policy has led to a significant deterioration in Canada’s federal finances over the last decade. The introduction of new and expanded government programs has caused federal spending to increase substantially, resulting in persistent deficits and rising debt.
- Canada also maintains markedly uncompetitive personal income taxes relative to many other advanced economy jurisdictions. This hinders Canada’s ability to attract and retain highly skilled workers, entrepreneurs, and business owners.
- Canada must make meaningful policy reforms by pursuing reductions in both federal spending and tax rates to address the current fiscal and economic challenges
Source: The Fraser Institute
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