{"id":901723,"date":"2026-09-19T13:44:12","date_gmt":"2026-09-19T13:44:12","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/901723\/"},"modified":"2026-09-19T13:44:12","modified_gmt":"2026-09-19T13:44:12","slug":"ottawas-summer-spending-flurry-offset-by-stronger-gdp-oil-revenues","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/901723\/","title":{"rendered":"Ottawa’s summer spending flurry offset by stronger GDP, oil revenues"},"content":{"rendered":"

OTTAWA \u2014 The federal government likely finds itself in a better fiscal position as it heads into the fall session of Parliament this week, thanks in no small part to some rosier economic results.<\/p>\n

One of the headlines coming out of the Canada Investment Summit last week that flew under the radar was Prime Minister Mark Carney\u2019s announcement that the federal government is on track to balance its operating budget a year ahead of schedule.<\/p>\n

When Carney took office in 2025, he reoriented the federal budget framework toward promoting capital investments in a bid to address Canada\u2019s long-standing productivity shortfalls.<\/p>\n

The Liberals also have outlined $60 billion in existing government spending they plan to trim over five years, in part by downsizing the federal public service.<\/p>\n

Carney promised that the government would balance operating spending in three years\u2019 time to allow it to borrow only for things that lead to capital formation, like infrastructure and other major projects.<\/p>\n

The prime minister said earlier this week the government will now hit that milestone next year, instead of by fiscal 2028 as first promised.<\/p>\n

\u201cA persisting commitment to fiscal prudence, discipline and spending efficiency \u2026 has moved up balancing the operating budget agenda by a whole year,\u201d said John Fragos, spokesperson for Finance Minister Fran\u00e7ois-Philippe Champagne, in a statement to The Canadian Press.<\/p>\n

Some experts argue that the improvements to Ottawa\u2019s bottom line have more to do with the economy than with fiscal prudence.<\/p>\n

The first quarter of the federal fiscal year was much stronger than most economic forecasters predicted back when the Liberals tabled the spring economic update in April.<\/p>\n

Randall Bartlett, deputy chief economist at Desjardins, said federal revenues are up 10 per cent year-over-year for the April to June period. The government\u2019s spring update called for a revenue increase of roughly 3.5 per cent for the whole year.<\/p>\n

Solid consumer spending and robust corporate profits were among the factors giving federal revenues a boost in the spring, Bartlett said.<\/p>\n

Another major factor has been global oil prices, which have been holding higher and for longer than many anticipated.<\/p>\n

The federal government has turned some of its windfall from higher oil revenues into a break for motorists at the gas pumps through a pause on the federal fuel excise tax in the spring. Earlier this month, Champagne announced that measure would be extended into 2027.<\/p>\n

Those extra revenues have helped offset a raft of federal spending announcements over the spring and summer.<\/p>\n

Bartlett estimates Ottawa has announced more than $100 billion in spending over the next 10 years since the spring update. His figures include an estimate of public money needed to finance a proposed oil pipeline from Alberta to the B.C. coast.<\/p>\n

Bartlett said those two countervailing forces on Ottawa\u2019s bottom line should leave the overall deficit trajectory fairly stable compared to the spring economic update, and could suppress the debt-to-GDP ratio when Ottawa publishes its fall budget.<\/p>\n

Also adding to the Liberals\u2019 deficit is the \u201cproductivity mega-deduction,\u201d a new tax measure announced at this past week\u2019s investment summit that is meant to stimulate business capital spending. The deduction is expected to cost $36 billion over five years.<\/p>\n

But Bartlett said that while this new tax expenditure is aimed at capital formation, it should be classified as program spending and sorted into the federal government\u2019s operating budget.<\/p>\n

He and other fiscal hawks, including the parliamentary budget officer, have criticized Ottawa\u2019s loose definitions for capital and operating spending.<\/p>\n

\u201cA capital investment, as it\u2019s accounted for in public accounts, is an asset which then goes on the federal balance sheet. This does not,\u201d Bartlett said.<\/p>\n

\u201cThe definition that\u2019s used for operating expenses by the federal government in its budgeting process is not taken seriously by anyone outside of Ottawa.\u201d<\/p>\n

Fragos said in his statement that the federal government is being stringent with the public purse. Tracking operating expenses is a better guardrail than other traditional anchors like debt-to-GDP because it relies on absolute levels rather than a ratio, he argued.<\/p>\n

He also pointed out that debt-to-GDP is stable over the long-term in Ottawa\u2019s outlook, which \u201cprovides an additional guardrail\u201d for federal finances.<\/p>\n

Sahir Khan, executive vice-president at the University of Ottawa\u2019s Institute for Fiscal Studies and Democracy, said the government\u2019s definitions for capital and operating expenses aren\u2019t inherently bad, though they might be \u201ca bit broader\u201d than they are in other jurisdictions.<\/p>\n

Khan also attributes much of the improvement in Ottawa\u2019s fiscal position to stronger tax revenues. He said the government\u2019s new retaliatory duties on U.S. goods are mostly a wash fiscally because that revenue is largely repurposed into supports for tariff-stricken sectors.<\/p>\n

Khan said the Carney government\u2019s bias toward capital spending is a departure from former prime minister Justin Trudeau, whose government tended to focus on program spending and transfers to achieve policy objectives.<\/p>\n

Khan said while the government still needs to keep a close eye on its deficit and debt costs, borrowing to finance a capital-focused agenda can pay dividends by eventually generating returns if those investments bear fruit.<\/p>\n

\u201cWe want to see returns to the economy and eventually to the federal government in terms of additional tax revenue, which \u2026 is going to take time,\u201d he said.<\/p>\n

Bartlett said Ottawa\u2019s efforts to kick-start Canada\u2019s economy will be hamstrung until there\u2019s clarity on the U.S. trade front.<\/p>\n

\u201cIs it going to have a positive impact on business investment and ultimately economic growth and productivity? Probably. How much of an impact is it going have? We don\u2019t know,\u201d Bartlett said.<\/p>\n

The government\u2019s new tax incentive might help inject some life into Canada\u2019s stagnant business investment landscape, he said, but its overall impact might be limited by drags on growth caused by tariffs and trade uncertainty.<\/p>\n

\u201cThere are a lot of other headwinds facing the Canadian economy.\u201d<\/p>\n

\t\tKeep it Factual<\/p>\n

Add CityNews Calgary as a trusted source on Google to see more local stories from us.<\/p>\n

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