99% chance of failure: PBO's warning on Canada's debt | Is our fiscal anchor at risk?

[00:00:00]in session, and our friends with the media are welcome to stay, but if you could just turn off your cameras. Uh we welcome back today our Parliamentary Budget Officer. Before we start, colleagues, um very quickly, we discussed among the parties that we will uh adopt to you see uh the motion put by Ms. Suds on June 10th regarding M-16.

[00:00:23]We're fine with that. Wonderful. And we'll just do the two budgets now cuz we have a heavier crowd in the second hour or so. We have two budgets to approve, one for today for today's study, and second one for the extension of the CER.

[00:00:37]If we can have unanimous consent, thank you very much.

[00:00:42]Wonderful.

[00:00:43]Uh PBO Ryan, welcome back to OGO. We'll turn the floor over to you for 5 minutes. Please go ahead.

[00:00:50]>> Thank you very much, Mr. Chair. I am very pleased to be here today, and I do thank the committee for the invitation to discuss uh my office's recent reports, one on supplementary estimates A for 2026-27, and of course the other is our economic and fiscal outlook for uh as published on June of 2026.

[00:01:12]>> I'm joined today by Mark Maharbir, Director General and General Counsel, Costing and Budgetary Analysis, and Govinda Bernier, Director, Budgetary Analysis, who both led the work on our report on the supplementary estimates A 2026-2027, which was released on June 9th, 2026.

[00:01:37]I'm also joined by Christina Grinshpoon, Director, Fiscal Analysis, and Carolyn Nickel, Advisor Analyst, who were involved in overseeing and drafting, respectively, our report on the economic and fiscal outlook, published on June 4th, 2026.

[00:01:58]I'll >> with the estimates.

[00:02:00]Supplementary estimates A seek 3.6 billion for 16 measures from budget 2025.

[00:02:08]Together with the 14.7 billion dollars sought through the main estimates, we assess that approximately 90% of budget 2025 expenditures planned for this fiscal year have now been reflected in the estimates.

[00:02:22]Supplementary estimates A also include 358 million dollars for six measures announced in the spring economic update of April 28th.

[00:02:33]This amount represents 4% of new expenditures announced in the spring economic update planned for this fiscal year.

[00:02:44]>> I would now like to highlight a few points from our report on the economic and fiscal outlook.

[00:02:50]>> economic and fiscal outlook or the EFO was published on June 4th and prepared using information available as of May 8th following the spring economic update on April 28th, all 2026.

[00:03:10]>> As committee members know, economic forecasts are based on information available at a given point in time.

[00:03:17]Our report was prepared using information available as of May 8th, 2026 and therefore did not take into account the national accounts published by Statistics Canada on May 29th.

[00:03:33]>> On May 29th, Statistics Canada revised its annual real GDP growth for 2025 upward from 1.7 percent to 1.9% for the entire year.

[00:03:48]In that release, Stats Can also reported that real GDP contracted at an annualized rate of 1% in the fourth quarter of 2025 and a further 0.1% in the first quarter of 2026.

[00:04:05]These revisions to GDP did not materially change the forecasts we presented in our economic and fiscal outlook on June 4th, which already anticipated below potential economic growth through 2026.

[00:04:22]In this way, parliamentarians should view our projections as reflecting continued below potential growth through 2026, broadly consistent with recent assessments by the Bank of Canada.

[00:04:37]That said, based on the information currently available, the Parliamentary Budget Office is not of the view that the Canadian economy is on a clear negative trajectory.

[00:04:49]The two quarters of negative growth into early 2026 have more recently been followed by strengthened monthly data in respect of GDP, employment, trade, and manufacturing.

[00:05:04]It is important to keep in mind that economists monitor indicators associated with recession because they may signal the need for significant changes in economic policy.

[00:05:17]>> For example, a deterioration in economic conditions could lead governments to consider additional spending measures to support economic activity, measures on which parliamentarians may have differing views.

[00:05:33]>> The Parliamentary Budget Office will continue to monitor incoming economic data and evolving economic conditions, and we will continue to update parliamentarians on our assessments.

[00:05:48]>> Thank you. We will be happy to answer your questions.

[00:05:51]>> Thank you. We'll start with Mr. Chambers. Welcome back to Ogo, Mr. Chambers. Floor is yours for 6 minutes.

[00:05:57]>> Thank you very much, Mr. Chair. It's a pleasure to be at the mighty Ogo.

[00:06:01]Uh Ms. Ryan, uh thank you for for being here. I would like to congratulate you on your appointment. It's the first time we've had uh see each other at committee, and thank you for your service to Canadians.

[00:06:11]But also, I I think uh like to appreciate the work that your office has has put forward, and you come with your officials here that I know do a tremendous amount of work, and I appreciate some of the recent work that you've released. Uh if I might, I'd just like to spend >> order, Mr. le President.

[00:06:27]>> Point of order, Mr. Chair.

[00:06:29]I was waiting a little bit, but there was no interpretation.

[00:06:35]>> Thank you.

[00:06:36]>> Uh thank thank you very much. I I appreciate the opportunity to ask some questions today. If I might, I might focus on your recent economic outlook, if that's okay.

[00:06:46]Um one of the things I've been starting to pay a little bit more attention to is debt service costs.

[00:06:52]And we've seen, even in the current the baseline projection provided in the fall economic update, that just within a few years few years, the debt service costs will approach about 80 billion dollars.

[00:07:04]Uh another fact that I understand to impact the potential for the fiscal outlook is about 40 to 50% of the federal government debt is purchased by hedge funds. Uh this is uh outlined by the Bank of Canada. It's been outlined as a rising vulnerability.

[00:07:25]Uh if there is an economic event outside of Canada, and now a large proportion of our expenditures are now going to service on the debt.

[00:07:38]We also fund our debt with short-term instruments, mostly two and three years.

[00:07:43]The average maturity is about 6.6 years for the Canadian federal government, as I understand.

[00:07:49]This year, we have to borrow $510 billion in the market. Next year, we have to borrow almost $600 billion.

[00:07:56]Uh and the year following that, 2 years from now, another $550 billion, which means we're basically rolling over the debt frequently.

[00:08:04]So, my questions are more around the sensitivity now to the fiscal framework based borrowing costs. We've seen the 5- and 10-year rates go up. So, borrowing costs are actually going up, not coming down, but the entire fiscal projection the government makes is actually on borrowing costs going down.

[00:08:22]So, I'm just wondering if this is a an issue you're exploring. I know you do some sensitivity analysis, but just wanted to get your feedback on uh keeping an eye on that debt service cost number.

[00:08:34]>> So, thank you very much for the question. It is very much an issue that we are concerned about uh within the Parliamentary Budget Office. And uh within our report, we've tried to start to bring more focus to the question of debt service charges.

[00:08:50]Uh first of all, by por- portraying the track that you described uh from different perspectives. So, we highlight, for example, that we see debt service charges uh as a share of every available dollar rising over a 5-year period from essentially uh 10.6 uh cents on the dollar uh up to 13.1 uh by 2030-31.

[00:09:13]So, it you know, I think that's one way to draw attention to it. It it it is starting to rise under current tracks with current uh expected interest rates and so on. Uh from a per capita basis, that rises from roughly $1,300 to almost $1,900.

[00:09:30]So, uh under a status quo track, it it it very much is is showing the uh type of profile that that you're talking about.

[00:09:38]I think that the Bank of Canada has been increasingly pointed in drawing attention to the dynamics that you speak about including the ownership of amounts of debt by hedge fund owners as well as the potential for uh essentially coincident risks happening you know in the global environment and and stock markets and so on.

[00:10:03]And so from a number perspectives I think that draws our attention to the risks within that debt service profile and while not kind of defining the question here I'd I'd certainly be open to speaking with yourself other open members about what type of sensitivity analysis you know we might put in play that would would help understanding of these measures and understand where the risks are for sure.

[00:10:28]>> Thank you very much. And just so if I just draw an underline the fact that the debt service costs are now and it's basically the second largest line item in the budget you know OAS costs are are higher. Um it's more than we spend now on health care and actually that gap is going to grow in the next couple years. I think understanding sensitivity around what would happen if interest rates don't drop as we predict or not as we predict as the government predicts what's that going to do to the fiscal framework because I think it will prevent some money being available for more productive uses >> budget is tax cuts or of course social programs. Uh and I might just ask about the impact on the fiscal anchor because I know that was also part of the work that you did.

[00:11:17]And if did I read your work correct that based on some of your assumptions the the government has about a 1% chance of of keeping their their new fiscal anchor?

[00:11:27]>> Uh that was very much part of our analysis in the fiscal outlook.

[00:11:32]Uh so, on your earlier points about the sensitivity, I agree and uh we'll follow up with it.

[00:11:40]In terms of the analysis about uh the chance of the government meeting its fiscal anchor for a declining share of deficit to GDP, uh you know, briefly what we did there was look back at the different types of shocks that have happened in the past.

[00:11:57]And year-over-year shocks.

[00:12:00]And the the the result that the government uh absent policy changes would have roughly a 1% chance of meeting its deficit as GDP target rests on uh essentially the the the reality that both deficits and uh so, the numerator as well as GDP itself uh are are quite sensitive on a year-to-year basis. So, given that that measure is defined as a decreasing track every year, uh that's what drives essentially that that mathematical baseline that it's going to be a very hard uh target to hit. Uh not uh impossible and especially if the government wants to manage it uh very carefully, but I think that is uh essentially uh the message that we want to put forward with that analysis.

[00:12:50]>> Thank you. My understanding is that if they do break it, that would be the third fiscal anchor not kept in the last three or four years.

[00:12:58]>> I haven't counted, but >> Does that sound about right?

[00:13:01]>> about right.

[00:13:02]>> Thank you very much, Mr. Chair.

[00:13:03]>> Thanks. Mr. Gasparro, please.

[00:13:09]>> Thank you uh for being here again. It's great to It's great to see you. Um in your uh PBO report, you uh touch on real GDP.

[00:13:20]Um and as you know well, um when you're looking at a country's fiscal position, reviewing it relative to its peers, I think is incredibly important because it gives the appropriate context for the macro global economic environment.

[00:13:38]So, in 2026, uh you rightly point out that real GDP is projected to rise by 1.1% followed by 1.6% in 2027.

[00:13:51]Um The IMF uh expects Canada to have the strong the second strongest economy this year among uh G7 countries after the United States. Uh in addition, external forecasts from the OECD also suggest that Canada is expected to grow at the second fastest pace in the G7 this year and next. Um does the PBO analysis uh show a similar pattern of relative strength?

[00:14:21]>> Uh so, I thank you very much for the question. We did not do uh an analysis of international comparables of of growth rates.

[00:14:31]Uh I would say that uh that type of analysis um it it it it checks with uh my my casual understanding of uh international growth rates. Uh so, I I would say as well that that that sounds about right.

[00:14:47]>> Um thank you for that. Um You also touched on obviously the main estimates in the supplementary estimates. Um in budget 2025, we're making strategic capital investments uh to raise long-term growth rates um and to try to build obviously uh a strong economy off of infrastructure and housing. Um some of our largest expenditures obviously then um uh flow into investments in housing and infrastructure. And the totals uh are are significant, whether it's $2.3 billion going into the Build Community Strong Fund or additional funding for Build Canada Homes and the Canada Infrastructure Bank.

[00:15:36]Can you um touch on um how that I think how important that is relative to our credit rating. So, Canada holds continues to hold the triple credit rating obviously giving us a strategic advantage relative to other major economies. Can you tell us why it's important for Canada to continue to maintain a triple A credit rating and how that helps with market confidence, borrowing costs, as well as supports our plan to build and finance infrastructure and housing.

[00:16:13]>> Thank Thank you very much. It's It's very rich question. I'll start with the aspect of credit ratings which are integral to the aspect of our borrowing costs as as raised by your colleague. And it has certainly been a strength of both the Canadian economy as well as Canadian public finances that we've been able to maintain that triple A rating.

[00:16:39]And it it has tangible benefits for us year over year in terms of those borrowing costs.

[00:16:46]And I think that it you know reflects a number of factors that you know that relate to the overall management of the Canadian economy and and and many many strengths as well as as you've spoken to.

[00:17:00]>> How much time chair?

[00:17:02]>> You're at 4 minutes so 2 minutes to go.

[00:17:04]>> Great. Thank you. um I'd like to drill down a little bit on the IMF for a moment.

[00:17:11]And the IMF just going back to real GDP growth Um, supports the 1 and 1/2 percent or they project a 1 and 1/2 percent increase in 2026 and they recently noted and I quote Canada's strong fundamentals and reliable access to external financing provide important buffers for the Canadian economy and quote. Um, from your perspective what factors are supporting Canada's ability to continue growing despite external economic headwinds?

[00:17:49]>> So there are there are a number of you know factors that that play to to Canada's advantage and that speaks to our natural resource base, our you know strong vibrant educated population, our you know our our our business environment, our business culture and so you know I think there there are many underpinnings for continued strength in the Canadian economy despite the headwinds that we face that that are are real and undeniable. I would say that on balance we generally agree with the forward track that was put forward by the Department of Finance in the spring economic update in terms of the general forward track of the Canadian economy. Which in turn was based on private sector forecasters of how the Canadian economy will develop over you know short to medium term.

[00:18:48]And so you know I think that track for both ourselves and the spring economic update was a bit more constrained than the figures that you're you're you're citing from the IMF but you know essentially reflect the fact that these headwinds from trade, you know from the the circumstances in the Middle East, uh from continuing uncertainty about the global environment generally, uh have been dampers on on that uh overall business environment uh for sure.

[00:19:23]>> Great. Thank you.

[00:19:29]>> Thank you once again.

[00:19:32]It's always very important to have the facts, and I'm aware that there have been changes with the new government in terms of the anchor. Even the IMF is asking that we reestablish our anchor, the debt-to-GDP ratio.

[00:19:55]For a long time, it was that ratio that was the main reference to assess the health of our finances, but today it has disappeared.

[00:20:08]So, now what is Canada's fiscal anchor?

[00:20:15]You raise a number of important points.

[00:20:21]I would say that we have two anchors with the government now.

[00:20:28]One is the percentage of the deficit to to the GDP, and the other one is a commitment from the government to balance spending to operational revenue.

[00:20:45]with revenue.

[00:20:48]And the government makes clearer their commitment to spend less and invest more in a framework where they seek to increase GDP as a total.

[00:21:10]To increase the denominator so that there's prosperity that would allow us to spend more in the future.

[00:21:27]The IMF asks us to re-establish it.

[00:21:29]I think it's important to not keep the idea that there's just one number that's important to manage something as complex as the government or the Canadian economy.

[00:21:42]And I think it's a suite of measure of measures that are important.

[00:21:48]But it's also important that the government keep its commitments.

[00:21:54]And if it doesn't happen, it's important to be transparent with Canadians and especially parliamentarians as to why and what they plan to do.

[00:22:04]Let's talk about public spending.

[00:22:06]We talk a lot about the cost but less about the quality because quality is about prosperity.

[00:22:18]In Canada, do we have enough tools to measure public spending in an accurate way?

[00:22:29]I would simply say no.

[00:22:32]I think we have a range of measures every year to look at government spending.

[00:22:41]But those annual reports from departments are structured by the government to set forth their perspective on spending.

[00:22:56]And I think we agree without putting words in your mouth to say that we would all benefit from more information on the quality of spending.

[00:23:14]So, it would be good for the Parliamentary Budget Office to assess the quality of the spending.

[00:23:25]I think that's an important objective and we've undertaken discussions on how to do so.

[00:23:32]Okay.

[00:23:34]Now, I have 2 minutes left. I have so many questions to ask you.

[00:23:40]Earlier, we talked about the cost of public investments.

[00:23:45]Aside from the quality of the investments do you calculate the cost of inaction?

[00:23:52]For example, housing deficit, aging infrastructure, for example, underinvestment.

[00:24:00]I would say that in the past we've done studies about exactly that.

[00:24:09]For example we conducted a study on housing in August 2025 and Caroline was one of the main authors of the study.

[00:24:22]And we aim to do more.

[00:24:25]Is there a risk that some savings today could lead to higher expenses tomorrow?

[00:24:34]I would say certainly.

[00:24:36]I wanted to hear you say it.

[00:24:40]I just have a few seconds left.

[00:24:42]At my next turn, I'll ask about major projects because we're talking about relative growth of 1 to 2% for GDP.

[00:24:50]And so, I'd like to know quickly with a low growth context and stagnant productivity what place should major projects have in a growth strategy?

[00:25:03]I think it's important to consider the way the government's plan could work.

[00:25:13]Often, government spending is advised when the economy is not very active.

[00:25:27]In addition, we could foresee that infrastructure would be the basis of economic activity in the private sector in the future.

[00:25:41]And that's the philosophy of the government, but as you've said, the question of implementation with a planning framework that's well thought out and well reviewed, so it's completed on time and on budget.

[00:26:02]Well, those elements are also important.

[00:26:05]Thank you very much, Mr. Chair.

[00:26:07]>> Please.

[00:26:09]>> Thank you, Chair, and thank you, Ms. Ryan, and to your colleagues for joining us today. I am going to focus on your economic and fiscal outlook. And I I really want to zero in on um one of uh the statements in the highlights, and it says the following, "Assuming no new measures are introduced and existing temporary measures sunset as scheduled, the budgetary deficit is projected to decline to 58.2 billion dollars by 2030 31."

[00:26:43]And I I I want to ask for a little bit more of an explanation of that, but perhaps I'll ask my first question. Your report also showed that the debt to GDP ratio will be flat over the medium term.

[00:26:56]Is that based on the same assumption?

[00:27:00]Uh that is long as there is no new funding introduced and all temporary spending sunsets.

[00:27:06]>> That's That's correct, Ms. Block.

[00:27:08]>> Okay. So, is this a reasonable assumption? This is getting back to my first question around an explanation.

[00:27:15]>> Mhm.

[00:27:17]Uh so I think it's it's it's difficult to portray all possible actions that a government might take. And so, for that reason, we wanted to have a baseline that people could understand, okay, what's in, what's out, and you know, and from there, I think reasonable people can take their own perspectives about what the government may do moving forward in terms of uh things like renewal of the Canada Health Transfer, which uh you know, is currently on a track to move to a much uh lower growth for provinces and territories per current legislation.

[00:27:55]People may differ in terms of whether the government will move to take that back up to the traditional 5 6% range.

[00:28:03]That's not in our forecast. It's not in our medium-term track. And so, we wanted to be clear and transparent so that as people kind of look at these type of measures moving forward, they can say, okay, that's not in, but we anticipate that that would be a reasonable thing to do. And if the government does that, um you know, you can do then calculations of well, where does that take us in terms of debt to GDP and so on. So, you know, so that was that was the underlying logic.

[00:28:30]>> Okay. So, just for my own understanding, how many times in the last 10 years has the government not introduced new spending? Did you take that into consideration?

[00:28:46]>> So, very few, if not definitely zero. So, uh I think uh you know, that that that question of how can we best support, you know, a discussion of the fact that that fiscal track has gone up year after year, you know, budget after budget, it is very much the reality.

[00:29:09]And uh you know, I think we um think that we could do better in terms of putting that forward in in a separate document uh you know, very soon that would make that more comprehensible for uh you know, parliamentarians and average Canadians to just benchmark that, right? So, you can think of, you know, take a year like 2025, you know, when it was first forecast, uh you know, what expenditures uh and I'm I'm I'm not going to be accurate here, would have been, you know, roughly 420 billion, then you know, rising through time uh you know, towards now the the level of five 510 billion uh that that we're at.

[00:29:51]>> Okay, so getting back to debt-to-GDP, if the government introduces new spending, for example, in the next budget, how much new spending would it take for the medium-term forecast to show an additional increase to Canada's debt-to-GDP ratio?

[00:30:11]>> Uh it's a calculation that you for sure could do depending on what you think GDP is going to do.

[00:30:19]And so, you know, I think there's some sensitivity work that that we could certainly do in that space. Um you know, if I may, I think it goes to the government's assertion that by investing more, they're going to expand that base and get that, you know, kind of virtuous circle of more GDP. But um you know, I think the government has also been clear that there's a number of risks to that uh to transpire and so if it doesn't come through then definitely the debt is certain to remain.

[00:30:51]>> So on page five you note that the increases to the government's revenues are being generated by higher energy prices not stronger economic activity.

[00:31:00]Is that correct?

[00:31:02]>> I would say currently a lot of the government's revenues have been generated by energy prices.

[00:31:14]>> Thank you very much chair and thank you Ms. Ryan and all of your team for being with us here today. Um I'm going to continue on a similar track as one of the things that caught my eye in your analysis of the supplementary estimates was the reduction in projected public debt charges.

[00:31:36]Um given that debt servicing costs are often a major focus of fiscal debates in this committee and of course in the house I think it's important that Canadians understand what's driving those changes.

[00:31:51]Your report notes a reduction of approximately 1.5 billion in projected public debt charges. Can you explain what factors have contributed to that improvement and tell us a little bit about you know in relation to Canada's current fiscal outlook.

[00:32:13]>> Thank you. And and thank you for drawing attention to that. I think it's important to shed light on you know the positive news as well. So that type of analysis shows up both in the study that we did on supplementary estimates A which is the track of you know what's being put before Parliament right now.

[00:32:33]As well as in the economic and fiscal outlook where we do project lower debt service costs versus previous forecasts as being a positive factor for, you know, the forward deficit and debt projections.

[00:32:48]Uh I would say that um you know, principally uh conservative budgeting uh approaches uh certainly showed up as being warranted and prudent, so that as conditions uh came forward to have uh a better uh interest rate profile than had been uh previously forecast, that you know, that um let those charges come in lower than uh previously forecast.

[00:33:18]>> Excellent. Thank you for that explanation. I think very uh helpful for for those who are paying attention. Um moving on or pivoting slightly, we're certainly living in a period of of considerable global uncertainty. Trade relationships, of course, are shifting.

[00:33:37]Um you know, geopolitical tensions remain elevated. Uh and many advanced economies are facing fiscal pressures after years of responding to successive crises.

[00:33:50]Um looking strictly at the fiscal indicators and the economic outlook, does Canada enter this period of global uncertainty from a position of relative strength compared to most advanced economies?

[00:34:08]>> Uh I think I think your your question, you know, is well framed uh in in flagging this context that is still uh I think precarious um and and will give us some some bumpiness, some some scarpiness going forward.

[00:34:24]Uh I think there are many reasons to think that Canada does come into this uh period from an advantageous position.

[00:34:31]Uh you know, we spoke earlier about, um, you know, the uh, economic conditions that are are positive including uh, our natural resources, uh, definitely a strength for Canada always, uh, as well as, uh, you know, a a a uh, you know, vibrant educated workforce.

[00:34:52]Uh, our tax uh, levels compare in many ways favorably to other countries.

[00:34:58]And our federal debt is lower on a comparative basis than uh, other G7 countries and so those are all positives that work in Canada's favor.

[00:35:09]That said, uh, our business conditions have been, um, uh, concerning for quite a while. Our productivity numbers, our business investment, our research and development, our entrepreneurship numbers, uh, have have been, um, uh, flat, uh, for for quite a while and that's translated into, uh, similarly, uh, lack of growth in GDP per capita, uh, over an extended time period that I think, uh, you know, raise uh, raise concerns as well.

[00:35:45]>> So, would it be fair to say that maintaining fiscal capacity today gives Canada more flexibility than many of our peers to respond to uh, future economic and national security challenges?

[00:36:01]>> That is absolutely a straightforward statement.

[00:36:05]>> That's my time.

[00:36:06]>> Giving up 13 seconds, but I'll go.

[00:36:09]Thanks, you.

[00:36:10]Madam GoTo for a 2 and 1/2 and 13 seconds.

[00:36:13]>> [laughter] >> I have three questions.

[00:36:20]First, concerning major projects and growth.

[00:36:25]The main risk for public finances today is it too much investment or a deficit of productive investment when we're talking about quality.

[00:36:45]I would ask what in what sense surplus or deficit.

[00:36:54]But I'll respond initially to say in the last decade there's an argument that a lack of major projects has contributed to a lack of growth in productivity.

[00:37:19]And so then it would be direct to say that there's a deficit in major projects.

[00:37:28]But I think your question has to do with the bottlenecks in having such a large number of major projects trying to move forward at the same time.

[00:37:46]And we need to consider the availability of labor even of funding financing and in management capacity to have so many projects move forward at the same time.

[00:38:02]Okay, that leads me to say when we talk about the quality of finances are there sectors with public spending that are increasing more quickly than the results obtained?

[00:38:17]I would say that I see the logic of your question, but I don't have an answer for you today.

[00:38:26]Would it be possible to answer?

[00:38:31]I would ask you I'll send you the wording of the question to be certain.

[00:38:40]Yes. Well, I've concluded, but I wanted to say it's not just about the amount we're spending, but it's with what goal for the future.

[00:38:52]That's my time. Thank you.

[00:38:54]>> Thank you. Uh colleagues, I just got a note from one of our associates in the house saying there's a vote coming. We'll have 30-minute bells, of course, so if the lights flash, can we just agree that we'll continue at least till we get through uh the last two uh rounds?

[00:39:10]Our last two interventions?

[00:39:12]Wonderful. We have uh Mr. Jansen for five, and then we'll finish with uh Ms. Martin with five. Go ahead, Mr. Jansen.

[00:39:19]>> Uh to follow up on my colleague's question, uh can we get you to produce a report on the projected future costs to our GDP from red tape and regulatory uncertainty?

[00:39:29]>> I would be happy to work with you on on how you would define those things and uh and see what's possible.

[00:39:36]>> Okay, so the government says this year's deficit will be 65 billion. Your office says it it will be closer to 72 billion.

[00:39:42]So, who should we believe, you or the government?

[00:39:46]>> I would say that our forecast reflects probably an extra at least two months' worth of information.

[00:39:53]>> Okay, could could could we say that the government's books are in worse shape from uh than the sorry, than the government is telling Canadians?

[00:40:01]>> I think in the two months uh of difference of when we published our update versus when the government kind of locked down its forecasts, uh there was more bad news than good.

[00:40:12]>> The report says there's less than 1% chance that the government's deficit to GDP plan unfolds as projected. For the average Canadian watching at home, does that mean that there's a 99% chance the government's plan does not unfold the way they say it will?

[00:40:26]>> I think that that is a fair statement.

[00:40:29]>> Okay.

[00:40:29]>> Unless the government takes action to correct uh how bumpy the economy can be.

[00:40:34]>> Um would you describe that as a significant fiscal risk?

[00:40:40]>> I would describe that as a risk to the anchor itself. I think that there's probably more uh margin to manage uh safely and prudently within that space, but the anchor itself is uh has got some design issues.

[00:40:54]>> And if uh a business came to a bank with a financial plan that had a 99% chance of failing, they would never get a loan.

[00:41:01]So, with that in mind, should Canadians be concerned about the government's current economic situation?

[00:41:08]>> I think the implication of that work is to say that because the economy uh remains subject to so many risks, and because the anchor is so sensitive to uh both the movement in the deficit as well as the GDP, it's going to be a tough uh tough target to hit.

[00:41:27]>> Does your report suggest that the government has left itself very little room for error if the economy weakens further?

[00:41:34]>> I would say it's left itself uh little room to hit uh the deficit to GDP declining target year over year in a consistent way. I think there remains room to respond to uh economic conditions separate from that.

[00:41:49]>> Your Your office forecasts economic growth of about 1.6. The Bank of Canada forecasts 1.5. The government forecasts 1.9. Would it be fair to say that both the PBO and Bank of Canada are more cautious than Canada's uh about Canada's economic outlook than the government is?

[00:42:06]>> I think our forecasts uh do reflect more uh news throughout the year because they were published after the government locked down its forecast and that it is definitely more pessimistic than the government's.

[00:42:19]>> Would a difference of 0.3 or 0.4 percentage points in economic growth have a meaningful impact on government finances over several years?

[00:42:26]>> Yes, they would.

[00:42:27]>> Does using overly optimistic growth assumptions make the government's finances appear healthier than they may actually be?

[00:42:34]>> I think time will tell on where it lands, but in a straightforward way, if the assumptions are too high, then the forecast will be too high.

[00:42:47]>> What are the biggest risks that could cause the liberal government's fiscal projections to miss their targets?

[00:42:53]>> There's a number of fiscal risks and you know, I think people are very cognizant of the trade situation, especially with the US, the ongoing conflict in the Middle East has implications for oil, for trade, for supply routes, for supply chains. And the you know, global stock markets I think are an increasing source of risk in that you know, people are very concerned that the valuations we're seeing right now maybe overly inflated and that could be painful to see it unwind.

[00:43:26]>> If you take away Canada's connection to the US market and basically you take away one of the biggest reasons that companies choose Canada in the first place.

[00:43:35]Would you say that that's a big risk?

[00:43:38]>> I think it's straightforward that Canada is got significant ties to the US and what happens in the US has always had big implications for Canada.

[00:43:49]>> And your office projects spending will be roughly 6 billion higher by 2030 than the government projects, correct?

[00:43:56]>> I think that holds.

[00:43:57]>> That means your office expects government spending to be higher than the government says it will?

[00:44:02]>> I think our forecast uh, saw a lot of revenue weakness, uh, especially in the personal income taxes. That's part of that.

[00:44:10]>> Does that spending gap remain after accounting for the government's CER initiative?

[00:44:16]>> Uh, we've built in the CER into that track. Uh, yes.

[00:44:20]>> That's our time. We'll go to, uh, Ms. Martin, please. Welcome back.

[00:44:25]>> Thank you. [clears throat] Merci. Merci d'être venue. And thank you for joining us.

[00:44:29]I'd like to, um, explore a little bit about the economic and fiscal update of, uh, June 2026, specifically around the notion that net exports, are projected to, uh, in your words, be a persistent drag given the the situation that we find ourselves in, particularly with the, um, unjustified, uh, tariffs being levied against Canada and many other countries, of course, around the world. Um, what if we were to see even a partial tariff rollback, uh, from the US over the course of the coming, uh, quarter or two? And what would the impact of that be on our fiscal outlook?

[00:45:11]>> Uh, it would it would definitely be positive.

[00:45:14]Uh, we haven't we haven't costed, uh, specific scenarios of specific, uh, tariff tracks. Our forecasts are based on essentially a status quo, uh, tariff environment. Um, but that would that would definitely be positive and, uh, help in a number of direct and indirect ways.

[00:45:33]>> Thank you. And, um, what if we were, uh, to be able to diversify our trade and, uh, see our net exports rise as a result of trade agreements with countries other than the US given the the situation that we find ourselves in with our largest trading partner?

[00:45:51]>> Uh, trade diversification [clears throat] and greater trade with other countries would definitely be a positive.

[00:45:57]>> So, would you say then that focusing as a government on trying to, uh, reach an agreement with the US to either partially or fully roll back these unjustified tariffs and focusing on trying to diversify our trade with other countries are two strong strategies for trying to boost GDP growth given given what's within our control as a country.

[00:46:21]>> I would agree with that.

[00:46:23]>> Thank you. I'd like to ask a couple questions around population growth and demography. You have some estimates around um growth stabilization over the medium term at a lower than historically lower rate than historically been the case for Canada. What do we know about the drivers of the demographic shift in the Canadian context?

[00:46:52]>> So I I think we've updated our demographic profile to be consistent with the the recent changes of the government's policy stance in respect of immigration in particular and so the profiles that you see have been updated to essentially align with that much lower growth scenario.

[00:47:17]>> What about within our country those communities in which we're seeing greater than than the average population growth? What do we know about those drivers of demography?

[00:47:28]>> Yeah, sure.

[00:47:29]I would say that that was not part of this study the the changes in demography inside Canada.

[00:47:39]So um it would be outside the scope of this work.

[00:47:43]>> So walk with me here.

[00:47:46]You know, it's my understanding that in general Canada has had a slower rate of population aging than many other comparator countries in part because of our immigration policy of which Canadians are I think rightly proud but in part also because newcomer communities and indigenous communities tend to have higher birth rates and therefore our demographic shift has been slower than for example in many European countries or other comparator nations. Is that consistent with your understanding of what shapes the particularly Canadian story around population aging?

[00:48:22]>> I'll ask Carolyn to take this.

[00:48:25]>> Yes, so I can I can give you a little bit of background about how we do our demographic modeling.

[00:48:30]Essentially what's part of our economic outlook there is a combination of our own modeling on the you know immigration flow in the short term kind of converging to the medium growth scenario from Stats Can. So the different dynamic you know happening in different parts of the country that's part of our advice to me because that's something that's reflected in their own modeling.

[00:48:52]>> So given that that >> Given that that's the case then it would seem that investing as a government in growing capacity among young people, investing in newcomers and making sure that they can achieve their economic potential and investing in indigenous communities so that indigenous youth can achieve their potential would be good ways to mitigate the demographic shift that we're seeing in all advanced economies. Would you agree with that?

[00:49:21]Great. Thank you very much. I think that's my time chair.

[00:49:24]>> With one second to spare.

[00:49:26]Uh Ms. Ryan and team thanks for being with us again. We certainly appreciate it and of course you are always welcome. We'll look forward to seeing you back for another meeting probably in early July when I call unexpected meetings.

[00:49:40]Anyways, have a wonderful summer.

[00:49:42]Colleagues we're going to suspend quickly but just hang on two secs cuz I need to discuss a couple things offline.