Report urges Ottawa and provinces to show restraint in their budgets
We all want better public services and to ensure that people are supported, but when governments spend there is always an impact on taxpayers.
A new report published today (May 15) finds that Canadian governments have increased the debt burden by the among the largest percentage relative to economy size out of 40 high-income countries and the highest among the G7.
The Fraser Institute’s director of fiscal studies, Jake Fuss, has co-authored The Deterioration of Canada’s Finances Internationally, a new study of the period 2014-2024 that analyzes total government spending.
"Over the last decade, the growth of Canada's government debt burden has outpaced virtually every other advanced country and contributed to a marked deterioration in the state of government finances," said Fuss.
In the ten period, total government spending increased from 38.4% of GDP to 44.7% - only Estonia increased more among the 40 high-income countries included – and total government debt across federal and provincial tiers increased from 85.5% of the Canadian economy to 110.8%.
"If governments across Canada want to stop adding to their debt burdens, they must better control their spending," Fuss said.
The higher-spending trend is not unique to Canada, as many countries have seen increased government spending and debt due to events like the COVID-19 pandemic.
"Taxpayers ultimately pay for government debt in the form of interest payments, which divert money away from key services, and future generations of Canadians could face higher taxes to pay for today's borrowing," said Grady Munro, policy analyst at the Fraser Institute and study co-author.
A recent report from the Investment Industry Association of Canada called for bold personal and business income tax cuts to support the economy in response to the threat from tariffs and other trade restrictions.
The new federal government is yet to set out clear spending plans and it is going to be the summer before a new budget is set out, with prime minister Mark Carney delaying its release but promising to cut the lowest tax rate to 14% from 15% on July 1.
“With [this] middle class tax cut, we are setting the stage for economic growth by helping hard-working Canadians keep more of their paycheques to spend on the priorities that matter most to them,” said finance minister François-Philippe Champagne. “Every Canadian should be able to afford necessities, feel secure, and get ahead financially—and this tax cut will help them do just that. As Canadians continue to feel the impact of ongoing challenges including trade and tariff uncertainties, they should be able to keep more of what they earn to help build a stronger future and a more resilient Canada.”
