A recent study by the Fraser Institute compared Canada’s fiscal situation with other countries in the Group of Seven (G7) and a broader group of 40 advanced economies worldwide. The study focused on two key indicators:
Government spending as a share of GDP: This measures the overall size of government in a country.
Government debt-to-GDP: This measures a country’s debt burden.
Here are the key findings:
Canada’s finances are deteriorating fastest in the G7. While Canada’s size of government and overall debt burden rank in the middle of the G7, the rate at which these are increasing is the highest.
Largest increase in government spending in the G7: From 2014 to 2024, Canada observed the largest increase in government spending as a share of GDP, increasing by 6.34 percentage points. This increase was nearly three times larger than that of the US. In contrast, France and Italy actually reduced their size of government during this period.
Largest increase in debt burden in the G7: Over the same decade, Canada experienced the largest increase in its government debt as a share of GDP, increasing by 25.23 percentage points. This was considerably higher than the increases in France (16.97 percentage points), the US (16.36 percentage points), and the UK (14.13 percentage points).
Similar trend among 40 advanced economies: When compared to 40 advanced economies worldwide, Canada experienced the 2nd highest increase in its size of government and the 3rd highest increase in its overall debt burden from 2014 to 2024.
Canada’s current standing: In 2024, Canada’s general government total spending was 44.7% of GDP, and its gross debt was 110.8% of GDP. Compared to the G7, Canada’s size of government ranked 4th highest and its overall debt burden ranked 5th highest.
Implications: The study suggests that if Canada continues on this trajectory, it risks harming economic growth and living standards. Research indicates that when government spending exceeds 32% of GDP, it can negatively impact the private sector and slow economic growth.
Regarding the inflation rate, Statistics Canuckstan reported that the annual inflation rate slowed further to 1.7% in April 2025, down from 2.3% in March. This significant drop was largely due to lower energy prices following the removal of the consumer carbon price. However, it’s worth noting that core inflation measures (excluding volatile items like energy) actually accelerated in April.
The next scheduled date for a Bank of Canuckstan interest rate announcement is June 4, 2025. Given the April inflation data, some economists believe that a second straight pause in rate cuts is now more likely, despite initial expectations for a June cut.
