Canada’s federal and provincial governments continue to slowly recover from the 2008–09 financial crisis, but the next fiscal squeeze is already on the horizon. Both levels of government face slowing growth in tax revenues due to changing demographics that will see a large number of retirements over the next decade. The provinces and territories will also have to contend with rising health care costs connected with an aging population.
The federal government has the brighter fiscal outlook and is on track to balance its books by 2030–31. The provinces and territories will not be as fortunate, however, raising the following question: How bad will the budget pressures get? Our analysis attempts to answer this question by developing a long-term outlook for federal and collective provincial finances based on our economic and demographic forecasts. We also explore how the fiscal outlook for the provinces and territories would change under different health care spending assumptions.