Budget 2025 has a very different tone from most of the Trudeau government’s budgets. There is much less talk of middle-class Canadians and their plight, far less emphasis on the need to implement new social programs and expand existing ones, and less attention paid to environmental concerns and issues of identity politics.
Instead, the Carney government’s first budget is unquestionably a document focused on the economic challenges we face as a country, the need to do more public investment, the imperative of inducing the private sector to spend more on productivity-enhancing investments, and the clear priority of bolstering our sovereignty by rebuilding our national defences. For this economist and voter, these changes are long overdue and very welcome.
Despite this important change in focus, however, the budget does not live up to the hype and rhetoric we have heard over the past several weeks. And this is probably a good thing. The budget is not laced with “austerity” and “sacrifices,” nor does it contain “transformative” changes and “generational” shifts. Budget 2025 is nothing like Budget 1995. Instead, the budget offers a pretty solid, but unspectacular change in direction.
As usual, the budget uses an average of private-sector forecasts for its best guess of future GDP growth and inflation, and this modest projected growth—almost exactly 4 percent per year in dollar terms—means that the government can continue running small budget deficits with only a slight resulting increase in the debt-to-GDP ratio.
The projected budget deficit for 2025-26 is $78.3 billion, more than double last year’s number but still only 2.5 percent of GDP. The deficit is projected to decline to just under $60 billion by 2029-30, and by then it will be only 1.5 percent of GDP. With the projected underlying economic growth and the planned budget deficits, the implied path of the debt-to-GDP ratio, which currently sits at 41.2 percent, gradually rises to just over 43 percent within five years. The federal government is using its fiscal power to address some of the economic concerns we face, and is doing it in a modest and responsible way.
Budget 2025 shifts focus to economy & defense. Is this a positive change from past social/environmental priorities?
Are the projected revenue and expenditure numbers in Budget 2025 realistic, or 'too good to be true'?
What are the 'worrying red flags' in Budget 2025 despite its 'solid, unspectacular' direction?
Comments (4)
“The deficit is projected to decline to just under $60 billion by 2029-30”
Your statement implies that it’s ok to have a deficit of the magnitude 5 years from now. Remember, this will be after 4 to 5 years of even bigger deficits.
Sorry but I totally disagree with your take on this. In fact, with all due respect, you’re off your rocker!
Our debt continues to pile up for future generations to pay. And the cost to service it will be more than health transfers. Also, there is never any mention about our total debt burden which includes the provincial debts. All told we’re in deep and your analysis only feeds into a false narrative that things will be ok. Without meaningful austerity they won’t.