Hub Podcasts Carney’s next budget will be built on a shaky fiscal foundation
Jul 11, 2025
The discussion delves into Canada's precarious fiscal landscape as the Carney government prepares its upcoming budget. Rising debt and interest rates threaten economic stability amid sluggish growth. Experts underscore the urgent need for strategic policy reforms to prevent a looming financial crisis. The episode provides insights into the potential risks that could shape Canada's financial future.
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Canada's Shaky Fiscal Foundation
- Canada's federal budget faces risks as debt servicing costs are rising faster than economic growth.
- A negative interest growth differential can cause debt to become unsustainable without fiscal adjustments.
Slowing Economic Growth Drivers
- Canada's real GDP growth is projected around 1.5%, much lower than historical averages.
- Aging population, lower productivity, and stagnant investment contribute to this slowdown.
Rising Cost of Debt Servicing
- Interest rates on federal debt are expected to rise above 3.5%, increasing debt servicing costs.
- These costs are among the fastest-growing federal budget expenses and will consume a larger share of revenues.