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The Fiscal Health of Canadian Governments The Conference Board of Canada, 23 pages, September 26, 2019 Report by Daniel Fields , Robyn Gibbard , Nigel Russell

The Fiscal Health of Canadian Governments

The Conference Board of Canada, 23 pages, September 26, 2019
Report by Daniel Fields , Robyn Gibbard , Nigel Russell

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The goal of this report is to provide a long-term fiscal forecast for the federal and provincial governments to assess their future fiscal capacity and pinpoint where pressure points are likely to arise. Document Highlights 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. Table of Contents Executive Summary Introduction and report objectives Methodology Long-term economic outlook Detailed forecast results Key take-aways Final thoughts: How to adjust to Canada’s changing demographics Appendix A—Detailed methodology Demographic assumptions Potential output Public accounts forecast methodology Forecasting health care spending

The goal of this report is to provide a long-term fiscal forecast for the federal and provincial governments to assess their future fiscal capacity and pinpoint where pressure points are likely to arise.

Document Highlights

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.

Executive Summary

Introduction and report objectives

Methodology

Long-term economic outlook

Detailed forecast results

Key take-aways

Final thoughts: How to adjust to Canada’s changing demographics

Appendix A—Detailed methodology