{"id":918137,"date":"2026-10-02T18:32:39","date_gmt":"2026-10-02T18:32:39","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/918137\/"},"modified":"2026-10-02T18:32:39","modified_gmt":"2026-10-02T18:32:39","slug":"public-sector-key-to-canadas-investment-boom-inside-provincial-capital-plans","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/918137\/","title":{"rendered":"Public sector key to Canada’s investment boom: Inside provincial capital plans"},"content":{"rendered":"

Public investment accounts for a larger share of Canada\u2019s capital spending (\u2018capex\u2019) than commonly understood, and provinces are the heavy hitters.<\/p>\n

But, now that the era of steadily rising provincial government capex is reaching fiscal limits, the burden is increasingly shifting to Ottawa.<\/p>\n

Here are four things to know about the importance of public investment, the debt consequences of provinces\u2019 post-pandemic capital surge, emerging constraints on further increases, and a growing federal role in public capex funding.<\/p>\n

1. Governments are big capital spenders with provinces in the lead<\/p>\n

Governments\u2019 role in Canada\u2019s investment spending is bigger than what standard metrics imply.<\/p>\n

Macroeconomic accounts put the government share of capex at 18% in 2025, yet this excludes government business enterprises (GBEs)\u2014many of which are capex-heavy such as BC Hydro or Ontario\u2019s Metrolinx.<\/p>\n

When you include GBEs, the public share of capex jumps to 26%, while reaching 40% for non-residential tangible assets (i.e., non-housing, non-intellectual property), which are at the heart of the federal government\u2019s planned investment boom.<\/p>\n

Provincial governments own 45% of public capital assets, followed by local governments and then provincial GBEs. Funding for public capex has also been predominantly provincial, although comprehensive official data is scant.<\/p>\n

Using public accounts data for Ottawa and the big four provinces1<\/a>, we estimate the provincial funding share was at least 75% in 2024\u201325 among senior governments (federal plus provincial, excluding GBEs and municipalities).<\/p>\n

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2. Post-pandemic capex surge pushed provincial government debt higher<\/p>\n

Gross real investment in provincial government capital assets has risen in recent years, while outpacing depreciation to also yield net asset additions. Much of this was self-funded. Capital spending by at least the big four provinces has also been on an uptrend.<\/p>\n

The post-pandemic economy was conducive to rising provincial investment.<\/p>\n

Provinces emerged from COVID-19 with debt-to-GDP ratios largely unscathed\u2014Ottawa absorbed most pandemic support\u2014while the nominal growth boom initially improved deficits and debt ratios. Infrastructure deficits and rapid in-migration then drove capex higher, still growing on a real per capita basis. Low interest rates (at the start) would keep the added debt serviceable.<\/p>\n

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While capex does not affect government deficit and some debt metrics the same as other spending, it does raise net debt, a measure important for investors (see below).<\/p>\n

Combined with large operating deficits, strong capex has seen provinces collectively use material fiscal space. The acquisition of non-financial assets accounted for 26% of provincial net borrowing between 2021 and 20252<\/a>.<\/p>\n

Yet this story varies across provinces. Some have seen big capital plans contributing to rapidly increasing net debt burdens (British Columbia and Maritime provinces), while others have had more success containing\u00a0recent debt\u00a0burden\u00a0increases (Ontario and Quebec) or benefit from stronger starting points (Alberta and Saskatchewan).<\/p>\n

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What does government capital spending do to deficits and debt?<\/p>\n<\/p>\n

Capital spending does not directly translate into higher deficits or lower surpluses. Generally, only amortization expense, capital transfers to third parties, and interest on associated debt are part of current spending. But, a rising capital stock means rising expenses over time.<\/p>\n

In a deficit situation, higher capex translates into higher gross debt and net debt (= gross debt \u2013 financial assets). It does not affect the \u201caccumulated deficit\u201d debt measure often highlighted by governments (= net debt \u2013 nonfinancial assets). However, net debt is the primary burden measure important for investors and credit rating agencies.<\/p>\n

3. Fiscal pressures cap the provincial government capex outlook<\/p>\n

Based on current capital plans, the big four provinces\u2019 gross real self-funded capex is expected to peak in 2026-27 before falling by 1% in 2027-28 and 15% the year after3<\/a>. If materialized, it would return\u00a0collective\u00a0real per capita capex for the big four provinces\u00a0close\u00a0to its 2021-22 level.<\/p>\n

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Capex is lumpy and spending timelines shift, but slower population growth and budgetary pressures suggest the recent era of routine upward revisions to provincial capital plans may be over.<\/p>\n

Economic risks, commitments or obligations to reduce deficits, spending demands from health care, rising interest rates, and other pressures should keep budgets tight.<\/p>\n

While the fiscal calculus is not quite the same for capex\u2014public infrastructure can often pay for itself over time through higher economic activity\u2014the unknown or extended timelines for these returns mean provinces with weaker fiscal capacity could be constrained now. Delaying non-critical capex is also often a preferred approach to fiscal restraint, even if it deepens infrastructure deficits.<\/p>\n

These dynamics are already bearing on the trajectory of capex programs: B.C.\u2019s 2026 budget delayed some capex, while Quebec\u2019s commented that plan would respect \u201ctaxpayer capacity to pay.\u201d<\/p>\n

While new government capex could slow, provinces\u00a0will remain primary capex funders\u2014their very large capital stock requires huge annual investment just to keep up with depreciation.<\/p>\n

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4. Federal government funding share to grow, but on Ottawa\u2019s terms<\/p>\n

Ottawa may pitch in as provinces face limited capacity to take on larger capital plans, but it will probably do so selectively.<\/p>\n

The federal share of senior government (federal plus provincial) capital funding is currently planned to increase with higher defence spending, and capital transfers to provinces and municipalities like through Budget 2025\u2019s Building Canada Fund.<\/p>\n

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But, Ottawa has also been expanding into provincial GBE funding, and its economic strategy suggests this may increasingly be the focus ahead.<\/p>\n

GBE capital programs are typically designed to be self-funding with expenditures recovered through energy bills, rider fares or other user fees. But, rising affordability concerns have seen federal and provincial governments intervene.<\/p>\n

Recent federal support include the Clean Electricity Investment Tax Credit, for which public utilities are eligible, and concessionary financing from the Canada Infrastructure Bank \u2013 where provinces have been its largest co-investor to date4<\/a>.<\/p>\n

Now Ottawa is positioning public infrastructure as long-term scaffolding for private investment amid sustained business uncertainty. Expanded grids or remote roads, for example, could draw in greener resource development, critical minerals mining, advanced manufacturing or AI data centres. Much of this infrastructure is delivered by provincial GBEs.\u00a0Half of the 20 projects currently referred to the Major Projects Office have public sponsors.<\/p>\n

But, a larger federal role must avoid crowding out provincial capex or undermining sustainable infrastructure funding models \u2013 not least because Ottawa must preserve its own fiscal capacity. The Parliamentary Budget Officer found that 2016\u2019s federal Investing in Canada Plan appears to have displaced provincial capex, essentially facilitating a deferral of tough, but necessary fiscal choices.<\/p>\n

Getting the federal\u2013provincial balance right will be critical. Canada\u2019s planned investment boom hinges not just on how much Ottawa spends, but on whether that spending genuinely adds to the national capital stock.<\/p>\n

About the author:<\/p>\n

Cynthia Leach\u00a0is the Assistant Chief Economist at RBC with a focus on federal and provincial fiscal analysis, government policy, demographics, and other thematic research.<\/p>\n","protected":false},"excerpt":{"rendered":"Public investment accounts for a larger share of Canada\u2019s capital spending (\u2018capex\u2019) than commonly understood, and provinces are…\n","protected":false},"author":2,"featured_media":918138,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[901,903,49,48,46,44,905,906],"class_list":["post-918137","post","type-post","status-publish","format-standard","has-post-thumbnail","category-canada","tag-alberta","tag-british-columbia","tag-ca","tag-canada","tag-economy","tag-news","tag-ontario","tag-quebec"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/918137","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=918137"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/918137\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/918138"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=918137"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=918137"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=918137"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}