Evidence of meeting #4 for Government Operations and Estimates in the 45th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was report.
A video is available from Parliament.
Conservative
Liberal
Vince Gasparro Liberal Eglinton—Lawrence, ON
Thank you, and welcome back to the mighty OGGO.
That's for you, Chair.
The last time you were here, last week, we focused on infrastructure, so it's only appropriate we pivot back to fiscal matters. Looking at our current position, we can't look at it in a vacuum. It has to be viewed, I would say, on a comparative basis.
Canada still maintains its AAA credit rating and its current debt-to-GDP ratio is, I think, 2.2%.
How does that compare to some of our G7 colleagues?
Interim Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Canada relative to other countries, if you look at the numbers, is in a more favourable situation immediately. I would say, for myself, the analogy is, I don't know, you're 200 pounds overweight and you have 50% body fat, and everybody else in your weight loss group has 75% body fat and is 400 pounds overweight and can't get out of bed.
Yes, relatively, we're in a more advantageous position. In many ways, that's the opportunity where hopefully we have space and time to move quickly to rectify the situation.
Liberal
Vince Gasparro Liberal Eglinton—Lawrence, ON
Is that a reflection of the current global economic environment?
Interim Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Very much so. The member referred to the work of the International Monetary Fund and a lot of what the International Monetary Fund has been publishing recently on the fiscal side is advice to all countries to reduce deficits, reduce debt and batten down the hatches and prepare themselves to make some tough decisions.
It certainly isn't exclusively advice to Canada but all applies to all other countries. As I mentioned last week, there are some countries, for example, looking at France and looking at the U.K., where their financial markets are certainly rockier than ours right now, certainly in terms of debt issuance. Relatively speaking, we're in a more favourable position. At the same time, that doesn't obviate the fact that the path that we're on right now isn't sustainable. We might have more time than those other countries, but we're going to end up in a very similar place without changes.
Liberal
Vince Gasparro Liberal Eglinton—Lawrence, ON
We're on a good fiscal path or we're on a better fiscal path than some of our G7 colleagues and you project our deficit staying under 2% of GDP and debt holding near the low 40% range.
Would you agree that these kinds of thresholds are really in practice fiscal anchors that signal some discipline?
Interim Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I would go back to one of the comments I made at the outset. The most important word in the release this morning was “unsustainable”. We didn't choose it carelessly. I've been in the office for 17 years. I was working in the federal government putting together budgets for 10 years prior to that. We choose these words with prudence and care. Certainly we don't want to be alarmist; at the same time, the current path we're on in terms of federal debt as a share of the economy is unsustainable.
Liberal
Vince Gasparro Liberal Eglinton—Lawrence, ON
Thank you.
Coming back to our credit rating, which is obviously a fairly internationally recognized standard in terms of how sustainable our fiscal position is, how does that compare to some of our G7 colleagues?
Interim Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Relatively speaking, again, similar to the fiscal metrics, we end up being further ahead or closer to the top of the group.
Conservative
The Chair Conservative Kelly McCauley
Before we go to Mr. Gill, just to follow up on Mr. Gasparro's comment, I do get a royalty every time someone calls it the mighty OGGO, so please continue with that.
Go ahead, Mr. Gill.
Conservative
Harb Gill Conservative Windsor West, ON
Welcome to the mighty OGGO, sir.
Thanks for being here, everybody.
This is a two-part question: If trade tensions and tariffs continue, how much worse could things get for Canadian businesses, jobs and prices, and what would happen to our economy if the CUSMA trade deal were rescinded or renegotiated in a way that hurt us?
Tim Scholz Advisor-Analyst, Office of the Parliamentary Budget Officer
I can take that.
We didn't do a specific scenario, a downside scenario, regarding the renegotiation of the CUSMA. However, it's important to point out that our baseline assumption regarding tariffs is that things will improve from current levels with respect to trading conditions with the United States. We do expect that they will remain less favourable than in the past, but things will improve. If things don't improve, then I think that would be a direct negative impact on our economic outlook.
Conservative
Harb Gill Conservative Windsor West, ON
Thanks.
On what basis are you painting that picture to say that it will possibly improve? It could possibly go down as well.
Advisor-Analyst, Office of the Parliamentary Budget Officer
Our assumption is based on, I think, the stated policy intentions and what we've observed over the past three months. It is a very volatile environment that changes day by day, and some of these assumptions regarding tariffs and sectors are moving targets. It appears, from Canada's perspective, that the intention is not to have these countermeasures in place permanently or as part of fiscal policy.
We are seeing from the United States that deals are being struck, depending, I guess, on various levels of favourability, depending on which country it is. Ultimately, as an office, we do have to make a baseline projection. We do a point estimate for our economic and fiscal outlook, and that does require an assumption that we're constantly updating. This one, we did think, was reasonable, particularly in the context of the CUSMA potentially being up for negotiation next year.
Conservative
Harb Gill Conservative Windsor West, ON
Our debt servicing is currently $55 billion for the whole year, so it's a billion dollars per week, roughly. It's projected to go up to, I think, $82 billion by 2029-30. At what point would the interest costs start forcing cuts to health care, education and other services? The growth rate is not going to be the same as a debt ratio is going...or are we expecting GST revenues to be matching that growth?
Interim Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
In terms of the increase in the debt-charge expenses, more broadly and as I mentioned earlier, the path that we're currently on isn't sustainable. The government will need to make choices to either increase revenues or cut spending in order to arrest this unsustainable path that we're on.
We don't put together the budget. We only analyze the budget and put together forecasts. I don't know precisely what's on the table at this point beyond what the government has already announced publicly.
Conservative
Harb Gill Conservative Windsor West, ON
The increase in revenue is possibly through taxes, then, an increase in taxes.
Interim Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Generically. In a situation where you need to reduce your budget deficit and need to be able to bring in, on a net basis, more revenue—so, you reduce your deficit in order to return to a fiscally sustainable path—you need to either increase your revenue—so, more cash coming in—or decrease the amount of money that you're spending, or do a combination of both.
September 25th, 2025 / 4:20 p.m.
Conservative
Harb Gill Conservative Windsor West, ON
In your previous appearance before this committee, you said that you weren't aware whether the government had any fiscal anchors. In your report, you outlined that the Liberals have abandoned their two previous fiscal anchors: namely that they will no longer have a declining debt-to-GDP ratio and that their budgetary deficits will exceed 1% of GDP. What impact will this have on future government spending if they continue to operate without fiscal anchors?
Interim Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Last week the Prime Minister was asked in question period to clarify the fiscal anchors. He did provide some clarification, indicating that there's going to be a greater shift to investment and a declining level of debt overall. That does provide some clarity that there are fiscal anchors. I believe that the Minister of Finance also provided guidance regarding a target, regarding a budgetary deficit as a share of GDP anchor. That being said, it certainly isn't comprehensive at this point with respect to what they are.
It's always helpful to have fiscal anchors, right? It's always useful. It's the reason.... Hopefully, you don't need guardrails while you're driving down the highway.
Conservative
The Chair Conservative Kelly McCauley
I'm sorry to cut you off there.
We're going to go now to Ms. Sudds now for five minutes.
Liberal
Jenna Sudds Liberal Kanata, ON
Thank you. It's great to have a chance to ask more questions.
Despite some of the comments I've heard over this first hour of the meeting, I think it's very fair to say that Canada is experiencing some historic challenges right now, of course, given everything that has been happening in this trade war. Undoubtedly, that has ramifications—massive ramifications—as we look at the report and at our economy.
As I reflect on this, I struggle to imagine an alternative, were we not making the investments that we are making in Canadians right now, acknowledging of course that it does cost and that there is a cost to that reflected in the projected deficit. I guess I would question what the alternative is at this moment in time when we know that Canadians need us.
Interim Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I don't know that, as interim Parliamentary Budget Officer, I'm well placed to comment on alternative economic or fiscal policy.
