I know from knocking on doors here in the Okanagan that affordability remains a serious concern for many families.
That is why today’s news that the Bank of Canada has raised its policy interest rate to 2.5% will be unwelcome news to those struggling with debt.
But it is not just families who face higher borrowing costs. Small and large businesses borrow money, and so do governments.
That last point is often overlooked. Governments also pay interest on their debt, and ultimately taxpayers are responsible for those costs.
How serious is Canada’s federal debt problem?
The Parliamentary Budget Officer (PBO) projects federal debt per capita will rise from $33,436 in 2026-27 to $39,191 by 2030-31. The federal debt-to-GDP ratio is also projected to rise from 40.8% to 42.6% over that period.
The cost of servicing that debt is also rising. The PBO projects federal public debt charges will reach $59.3 billion in 2026-27 and $83 billion by 2030-31.
Why should you care?
Because interest on the debt is not free. Every dollar the Government of Canada must devote to servicing its debt is money that has to come from somewhere.
As those costs grow, there is less room for priorities such as health transfers, infrastructure, national defence and public safety without raising taxes, cutting elsewhere or borrowing even more.
Governments can postpone these difficult choices by borrowing more, but they cannot make them disappear. Deficit spending can kick the can down the road, but eventually the bill still has to be paid. More debt today means more debt and interest for taxpayers tomorrow.
This is why Prime Minister Carney’s election promise matters.
During the last election, he promised Canadians a different approach to government spending. His Liberal platform stated:
“It will mean spending less on operations so we can invest more in the things that build Canada.”
Spend less and invest more. That was the promise.
The Government of Canada distinguishes between day-to-day operating spending and investment. Budget 2025 itself described its approach as “Spending Less to Invest More.”
Investment can be worthwhile. But whether the Government of Canada calls new expenditures operating spending or investment, Canadians still pay the interest on the debt used to finance them.
And this is where the latest PBO outlook raises serious questions.
The PBO projects a $63.3-billion deficit in 2026-27, rising to $67.8 billion by 2030-31. It also projects the government will eventually meet its operating-budget fiscal anchor, but not its second fiscal anchor of a declining deficit-to-GDP ratio.
The PBO’s conclusion is blunt: the government’s two fiscal anchors have imposed “limited fiscal discipline on government spending and borrowing.”
That is a difficult record to reconcile with the promise to spend less and invest more.
Fast forward to today, and Prime Minister Carney is preparing to announce a new federal budget next week.
My question this week: Will this be the budget where Prime Minister Carney honours his promise to “spend less and invest more,” or do you believe his government will continue to increase deficit spending?
As always, you are welcome to share your thoughts on my Facebook page, by email at Dan.Albas@parl.gc.ca, or by calling toll-free at 1-800-665-8711.
