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56m ago

PBO Says Operating Costs, Not Investment, Are Driving Bigger Deficits in Budget 2025

The watchdog projects an average five-year deficit of $64.3 billion.

Prime Minister Mark Carney holds up a copy of the budget as he and Minister of Finance and National Revenue Francois-Philippe Champagne, not shown, make their way to the House of Commons for the tabling of the federal budget on Parliament Hill in Ottawa, on Tuesday, Nov. 4, 2025.
Jason Jacques, Interim Parliamentary Budget Officer prepares to appear before the Standing Committee on Government Operations and Estimates, on Parliament Hill in Ottawa, on Thursday, Sept. 25, 2025. THE CANADIAN PRESS/Justin Tang
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Interim Parliamentary Budget Officer Jason Jacques says there's only a 7.5 per cent chance the Liberal government will hit its deficit targets. But its finances, while tight, are sustainable over the long term, he says.

Overview

  • The Parliamentary Budget Office estimates Ottawa will run average deficits of $64.3 billion over the next five years, roughly double the pace set out in the 2024 fiscal update.
  • The analysis finds new day-to-day program spending, not capital outlays, is the main source of deeper shortfalls, with 2025–26 still projected at a $78.3 billion deficit in the budget.
  • Under a narrower definition, capital investment totals just $217 billion from 2024–25 to 2029–30, about $94 billion less than Budget 2025’s estimate, which the PBO calls overly expansive.
  • The debt-to-GDP path is higher than shown in 2024 and no longer clearly declining over the medium term, leaving limited room to cut taxes or add spending without lifting the ratio.
  • The PBO puts the odds at 7.5% that the deficit-to-GDP ratio will fall each year from 2026–27 to 2029–30 and urges an independent expert group to determine what qualifies as capital.