The federal government won't be able to balance the budget until the year 2041, according to a report by the Canadian Taxpayers Federation (CTF).“The good news is the feds are now expected to balance the budget in 2041, which is about three decades sooner than the last PBO (parliamentary budget officer) projection,” said Franco Terrazzano, federal director of the CTF..“But taking another two decades to balance the budget is too long. And even that target won’t be met if interest rates tick up, the economy doesn’t grow every single year, or if politicians can’t find the willpower to say no to new spending.”.Last year, the CTF used supplementary data from the PBO fiscal sustainability report to show the feds wouldn’t balance the budget until 2070. .The supplementary data for this year’s PBO report indicates debt interest charges will have cost taxpayers $802 billion by the time the government balances the budget in 2041. .The CTF said in order to balance the budget by then, the federal government will need to have uninterrupted nominal GDP growth of 4% per year, a steady real GDP growth of 2% per year, and no new spending announcements beyond what is included in Budget 2022..They will also need an average annual interest rate of just 2.5%, which is lower than interest rates were any year between 1991 and 2015, to balance the budget..The current effective interest rate charged on the government’s debt is 1.7%. But the Bank of Canada just issued the largest one-time interest rate hike since August 1998, putting Canada’s benchmark borrowing rate at 2.5%..When campaigning to be prime minister in 2015, Justin Trudeau initially said he would run a few "modest" deficits before returning to a balanced budget in 2019. The government was set to miss that balanced budget by $20 billion, even before the pandemic happened..“By the time the feds balance the budget two decades from now, interest charges on the government credit card will have cost taxpayers more than $800 billion,” said Terrazzano..“Taxpayers have every right to be skeptical that this government can exercise enough restraint to balance the books by 2041.
