Finance Minister François-Philippe Champagne said Monday that the federal government plans to fund its recent large-scale spending commitments through a combination of economic growth and increased deficits, repeating his assertion that Canada holds the strongest fiscal position among G7 nations.
Government Defends Deficit-Fueled Investments
Speaking to reporters in Ottawa before officially launching the government's pre-budget consultations, Champagne emphasized that the government is investing in the Canadian economy to ensure new spending items can be sustained. “I think Canadians can understand that we have a strong fiscal position, and we’re investing in the things that will generate growth to the country,” he said.
The finance minister also highlighted the removal of interprovincial free trade barriers and strategic defence procurement as key drivers of growth. “We’ll do that in a very smart way,” Champagne added.
Skepticism from Economists
Economists remain doubtful that long-term investments will yield short-term gains or that high-cost projects will be financed without increased borrowing. Don Drummond, former chief economist at TD Bank and a former high-ranking official at the Department of Finance, warned that the government appears to rely on overly optimistic forecasts for economic growth and labour productivity.
“With threats like rising American tariffs, Canada could be making itself vulnerable, similar to the period from the mid-1970s to the mid-1990s when governments assumed stronger growth was just around the corner,” Drummond said.
Pre-Budget Consultations Underway
Although Monday marked the official start of pre-budget consultations, economists, industry groups, think tanks, and business organizations have been submitting budget wish lists and policy recommendations for weeks. Some submissions were made to the parliamentary finance committee over a month ago.
Champagne met with business leaders on Monday and announced that Canadians can participate in the budget process through an online portal until September 8.
No Mention of Spending Cuts
Prime Minister Mark Carney’s government has focused on improving Canada’s long-term competitiveness and diversifying exports beyond the United States, particularly by boosting corporate investment. However, achieving these goals will require significant spending.
After the Liberal government accumulated massive deficits in recent years, Champagne’s comments made no reference to spending cuts, suggesting the government intends to continue financing its priorities primarily through additional debt.
