Canadians are paying over $31 billion in surcharges and interest payments on federal debt, a new report by the Parliamentary Budget Office (PBO) shows.
The PBO’s Economic and Fiscal Outlook for October found that the cost of debt servicing is expected to balloon to $47.6 billion as a result of “higher interest rates and the additional accumulation of federal debt.”
“Given high levels of household indebtedness and elevated levels of house prices in Canada households could pull back their spending to a greater extent and residential investment could decline more than anticipated,” the report says.
Canada’s federal debt reached $1.3 trillion this year following several massive pandemic budgets tabled by the Liberal government.
According to the Canadian Taxpayers Federation federal director Franco Terrazzano, the PBO projections don’t necessarily show the entire picture.
“PBO projections assume no more spending than what has already been announced. But we know the last budget didn’t contain all the Liberals’ election spending announcements (never mind the NDPs’). Freeland said after her last budget: ‘We will do more things over the next three budgets’,” Terrazzano told True North.
“Taxpayers are paying more to cover interest on the government’s credit card. Interest charges will cost Canadians $257 billion by the end of 2027. That’s a cost of $6,400 per Canadian.”
Although Ottawa has pledged to lower Canada’s $113.8 billion deficit by 90% over the next five years, Parliamentary Budget Officer Yves Giroux called the plan unrealistic during a June 7 testimony before the Senate’s finance committee.
“I personally do not believe it’s credible that there will be that level of spending restraint,” explained Giroux.
“That would probably be fiscal tightening or expenditure restraint more severe than what we had seen under the Conservatives in the early 2000s.”
A recent report by the Fraser Institute found that 40% of federal deficits incurred during the pandemic “had nothing to do” with providing Canadians relief from Covid-19.
“Canadians may be surprised to learn that a significant percentage of Ottawa’s huge spending increases during COVID, which produced large deficits and much more debt, had nothing to do with the pandemic,” Fraser Institute senior fellow Livio Di Matteo said in a press release.
“As a result of Ottawa’s massive spending increase during the pandemic, the federal government will have a larger footprint in the Canadian economy now and for many years to come.”
Terrazzano said that with higher interest charges, the government will likely continue to go over budget.
“Over five years, the government will spend $34 billion over budget,” explained Terrazzano.
“The Trudeau government doesn’t exactly have a good track record on deficits. Trudeau said he would initially run a few “modest” deficits and balance the budget in 2019. He missed that by $20 billion even before the pandemic.”
