Canada’s budget watchdog says the federal government won’t balance its operational expenses against revenues until 2029-30, two years later than Prime Minister Mark Carney said it will.
The projection, released Thursday by the Parliamentary Budget Officer , contrasts with Carney’s assertion last week that his government was “on track to balance the operating budget next year, one year ahead of schedule.”
The PBO says its calculations are based on projections on available data, including last year’s federal budget and a spring update. Finance Minister Francois-Philippe Champagne will release this year’s budget in the coming months.
The watchdog said it also found inconsistencies in how the government decides what counts as operating spending versus capital investment.
Since his election last year, Carney’s fiscal pledge has been to “spend less to invest more.” His government has focused on balancing the operating budget while planning to run deep overall deficits to cut taxes and pay for defence, infrastructure and housing promises.
“While the government’s general proposition is that additional borrowing to prioritize certain capital investments will drive important forward prosperity, it does not set forth a testable rule as to how specific capital outlays have been or will be assessed to deliver tangible assets in the first instance and longer-term economic returns subsequently,” the watchdog said.
“It is not clear that all spending and taxation measures do translate into public or private capital assets.”
In a statement, John Fragos, a spokesperson for Champagne, pushed back on the findings and insisted the government would balance its operational budget next year.
“Separating capex and opex is common practice in other comparable jurisdictions like the United Kingdom, Norway, and Singapore,” Fragos said. “That the PBO is calling on the government to expand and broaden its definition of capital expenditures echoes the prudence with which we are moving to grow the economy by spending less on operations and more on measures that draw in investment, inspire confidence and unleash growth.”
Over half of respondents to a Bloomberg survey last month said they expect the federal government will run deeper deficits than was projected in April. Still, corporate profits have surged in recent months amid higher energy prices, potentially offering a revenue windfall.