Government Operations Committee on Sept. 25th, 2025

[The Chair, Conservative, Kelly McCauley]

Good afternoon.

Welcome, everyone, to meeting number four of the House of Commons Standing Committee on Government Operations and Estimates, known far and wide, of course, as the mighty OGGO, the only committee that matters.

I'd like everyone to remember to keep your headsets away from your microphones at all times so we can protect the hearing of our very valued and vital interpreters.

Welcome back, Mr. Jacques. You have some associates with you who, I understand, you're going to introduce. We'll start with you for five minutes. You have the floor, sir. Go ahead.

[Jason Jacques, Interim Parliamentary Budget Officer, Office of the Parliamentary Budget Officer]

Thank you, Mr. Chair.

Good afternoon to distinguished members of the committee. Thank you for the invitation to appear before you today.

I am pleased to be here to discuss our office's latest economic and fiscal outlook, which was published this morning. This report provides Parliament with a baseline projection of economic and fiscal outcomes under current policy settings, to support and inform your debates.

Our updated outlook presents a picture of an economy navigating significant global and domestic challenges. It incorporates new measures announced by the government since the 2024 fall economic statement with the exception of incremental measures to achieve the NATO 5% of GDP defence pledge and the government's comprehensive expenditure review. We will incorporate these and other measures when the government provides sufficiently detailed information. I'm now going to briefly summarize our findings.

On economic growth, we project growth in the Canadian economy to be modest this year and next, with real GDP growth averaging only 1.2%. This outlook is shaped by factors such as increased trade uncertainty and the implementation of tariffs as well as slowing population growth.

On inflation, we project inflation to remain near the Bank of Canada's 2% target and assume that the Bank of Canada will maintain its policy rate at 2.5% before returning it to its neutral level of 2.75% late next year.

On the fiscal outlook, we project the budgetary deficit will be $68.5 billion—that's billion with a “b”—this fiscal year, which is 2.2% of GDP. Looking forward, we project the deficit will decline slightly but remain close to $60 billion through the medium term.

On federal debt, we project that the federal debt-to-GDP ratio will be 42.5% of GDP this year, rising over the medium term and remaining well above its prepandemic level.

Mr. Chair, in the spirit of providing the clearest and most direct information to this committee, I'm proposing to try a slightly different approach today. With me at the table are the lead analysts and directors who were responsible for preparing this outlook: Diarra, who is in charge of our economic forecast; Kristina, who is in charge of our budgetary and fiscal outlook; and Tim, who looks like my security guard but is responsible for our work on tariffs. They're the experts who built the models and performed the analysis that underpins the report you have before you.

While I am, of course, prepared to answer any and all of your questions, I believe the committee's work will benefit from the opportunity to hear from them. With your permission, I have asked my colleagues to respond directly to your questions regarding the economy, tariffs and fiscal outlook.

Our office remains steadfastly committed to its core mandate: providing independent, non-partisan analysis of the nation's finances and the economy.

Thank you for your time. We are now happy to answer your questions.

[The Chair, Conservative, Kelly McCauley]

Thank you very much, Mr. Jacques.

I'll start with Mrs. Block for six minutes, please.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you very much, Chair.

Thank you to you, Mr. Jacques, and to your colleagues for joining us here again today. It's good to see you in just one short week since your previous appearance. I do appreciate the report that you tabled and look forward to the answers that you and your team are going to provide today.

In figure 1 of your report, you no longer predict the debt-to-GDP ratio improving. In fact, it would appear that what was once a fiscal anchor has now been abandoned by the Prime Minister and his government, as your report indicates the debt-to-GDP increasing to a clearly alarming rate of 42.5%.

Is this sustainable? At what point does it hit a critical point? Should Canadians be concerned?

[Jason Jacques]

To answer I think the most important part of the question first, everybody should be concerned. Jokes aside, it's a really serious day, right? This is the first time in 30 years that we've tabled an economic and fiscal outlook where the fiscal anchor.... The general and probably most important fiscal anchor for any government is a declining or at least stable debt-to-GDP ratio. This is the first time in 30 years that I've seen one in which that ratio is going up over time. That's definitely a cause for concern.

Certainly on our end we're hoping and certainly expecting the government, as part of budget 2025, to clearly indicate what the government plans to do to address this problem, because it's certainly not sustainable.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you.

In response to your last statement, again under the current leadership, this government is set to worsen the outlook of our debt. Have you had any indication that it is going to change course?

[Jason Jacques]

The government has indicated that they're planning on tabling a budget on November 4. Certainly looking at the public statements of the Prime Minister and Minister of Finance, I don't think these numbers come as a surprise to them. Some of the language that the Prime Minister has used certainly has been very strong with respect to the economic and fiscal challenges that are facing the country right now. Again, we look forward to seeing the government's plan to manage or address the challenges that Canada faces.

As the Parliamentary Budget Office, and as we discussed last week, our job is to set the table for parliamentarians, to present numbers to you so as parliamentarians you're well prepared to engage in thoughtful and meaningful discussions regarding how this projection hopefully will not come to pass.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you.

In your opening statement, you spoke to the fact that this outlook does not include incremental measures to achieve our North Atlantic Treaty Organization commitments. I'm wondering if you would be able to comment on what other spending that may have been included in the Liberal platform is not included in your numbers.

[Kristina Grinshpoon, Director, Fiscal Analysis, Office of the Parliamentary Budget Officer]

The last time I looked, there's about $20 billion or so in spending that has not yet been included in our outlook from the Liberal platform, if it does come to pass. We will see on November 4 what they will announce and what they don't announce, but roughly that is what is not included in our outlook right now.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you.

Last week we talked about the government looking to change the rules for accounting and splitting out capital and operating and how they may choose to define those things. I can't find a rationale from the government on why they would overturn a long history of accounting practices with the budget.

Can you explain why the Liberals are separating the capital and operating budgets? Why can't they demonstrate progress in the economy without making these changes?

[Jason Jacques]

I would note that the government up to this point has indicated that they're planning on maintaining the existing presentation of data, so the traditional measures of debt and deficit you see in the public accounts that everyone is used to, in addition to presenting this new framework of splitting the operating and capital budgets, or day-to-day spending plus some sort of investment. It's an approach that happens in other jurisdictions. To the best of my knowledge, pretty much every Canadian province has an operating budget, a standard budget, plus an investment budget. As we discussed last week, the City of Toronto does the same thing. To the extent that it can be additive and helps parliamentarians understand that potentially more money needs to be borrowed over the short term in order to make investments to transition to longer-term sustainable economic growth, potentially at a higher level, it could potentially be useful.

Going back to the point—

[The Chair, Conservative, Kelly McCauley]

I'm sorry; I have to cut you off. We're passed our time. Perhaps we can get back to it next round.

Ms. Sudds, please, for six minutes.

[Jenna Sudds, Liberal, Kanata, ON]

Thank you very much.

Thank you for being with us here again.

It's my understanding today that we actually have two reports that were tabled. Although your opening remarks leaned heavily, of course, on the economic and fiscal outlook, I want to spend a bit of time as well on the “Federal Infrastructure Spending”, if I may.

First, just to be clear, the report is reflecting infrastructure across the entire government, not just within the Department of Infrastructure. Is that correct?

Yes, okay. Thank you.

I have an obvious question that I don't think was addressed. Just what needs to happen? What can government do in order to make the system better?

[Jason Jacques]

It's a really good question. As interim Parliamentary Budget Officer, I am not particularly well placed to answer it from a government-wide perspective. There's something that we do mention in the report and that definitely jumped out to us. We've been tracking infrastructure spending across government since 2016, when the federal government made a big push to increase spending and infrastructure spending writ large and spread it out across various departments. A recurring theme is that it's exceptionally challenging and very difficult to actually pull all the data together. Unfortunately, it continues to be the case.

That's the first thing, if one was looking for an opportunity to actually fix, improve, the area of infrastructure spending across the federal government. Simply keeping track of it in a better way would be useful for everyone. As well, linking to the previous question with respect to the presentation of operating and capital budgets, infrastructure spending and these transfers are payments that go out to other levels of government. It's not traditional capital spending on federal assets. Conceivably, you would want to incorporate it as part of your capital budget. If you're not tracking it, if the government is not tracking it, it's going to be really hard to actually do that. That's probably one of the key challenges that the government and the public service is going to face.

[Jenna Sudds, Liberal, Kanata, ON]

Excellent. Thank you for that.

I am curious about your thoughts as to whether the Infrastructure Bank is helping to reduce the infrastructure deficit in the country.

[Jason Jacques]

I don't think as interim Parliamentary Budget Officer I have an opinion on that. We haven't looked at the specific contribution that the Infrastructure Bank makes to alleviating or reducing the infrastructure deficit across the country.

[Jenna Sudds, Liberal, Kanata, ON]

Perhaps in a future study it's something to dive into. There is certainly quite a bit of activity there.

To your earlier comment about the desperate nature of the infrastructure spend, who should be tracking the infrastructure spend across government if it was to be a centralized authority?

[Jason Jacques]

Again, as interim Parliamentary Budget Officer, I don't think I have an opinion with respect to, within the government, among the federal departments who is tracking it, only that there is somebody who is tracking it centrally, that there are clear definitions, and the information is obviously being fed to the relevant minister and the Department of Finance on a relatively frequent basis. This applies both in terms of planning on the budgeting side, so how much of the budget is going to be split into operating and capital, and also how much money is actually going out the door in a timely way. As part of the work we have done on infrastructure in the past, that was another one of the interesting findings. Notwithstanding the budgetary announcements for many new programs, there ended up being challenges in actually spending the money as originally anticipated. Of course, in some situations, the money is transferred to other governments. It's hard for the federal government to actually tease out precisely how it was spent.

[Jenna Sudds, Liberal, Kanata, ON]

Thank you.

Our government has been quite clear and has been on the record about the desire to leverage more private capital particularly for things like infrastructure. Do you view this positively and what is the best way that this could happen, such that it benefits Canadians?

[Jason Jacques]

Looking at the infrastructure deficit across the country and looking at the government's interest in increasing capital spending writ large at this point, obviously you'd want as many sources of capital as possible as opposed to exclusively relying upon the federal government and its balance sheet to borrow the additional money to make the contemplated investments.

In terms of how that would best be done, if you look at the balance sheet of the Government of Canada, there are some things they've already done in the past, starting with the straight borrowing of additional money, making those investments themselves on the assets that they own and borrowing the money and potentially funding another organization like the Canada Infrastructure Bank that could potentially partner or make investments or provide loans or, potentially, loan guarantees. There's a suite of options available to the government.

The nature of what you do really depends on the nature of the asset you're looking at. There are some projects that are very large and potentially very high risk, and it potentially makes more sense, if they want to see the projects done, for the government to intervene in that situation because the market won't naturally intervene and actually make it happen.

[The Chair, Conservative, Kelly McCauley]

Thank you very much.

Ms. Gaudreau, please go ahead for six minutes.

[Marie-Hélène Gaudreau, Bloc, Laurentides—Labelle, QC]

Mr. Chair, when I received the document at 9:00 a.m., I obviously read it in full very carefully. That's why I've prepared more than 10 very specific questions.

First, which is most concerning? Is it the increase in the debt-to-GDP ratio, or is it the lack of a specific budget plan?

[Jason Jacques]

I think it's the increase in the debt-to-GDP ratio. According to the Government of Canada, there will be a plan on November 4. In all honesty, even before we published our figures, it was clear that Canada was facing a major challenge. However, we were stunned to see the numbers and the increase in debt relative to the size of our economy.

[Marie-Hélène Gaudreau, Bloc, Laurentides—Labelle, QC]

Okay. We're looking forward to November 4. For the moment, we have the picture of the current situation.

The Prime Minister presented himself as an international banker. Do you think he's taking the economic and fiscal situation seriously?

[Jason Jacques]

I'm not a psychologist. As the interim Parliamentary Budget Officer, I'm not in a good position to assess the mental state of the Prime Minister of Canada.