From the Fraser Institute

By Jake Fuss and Grady Munro

Some analysts compare Canada’s fiscal health with other countries in the Group of Seven (G7) to downplay concerns with how Canadian governments run their finances. And while it’s true that Canada’s finances aren’t as bad some other countries, the data show Canada’s finances are deteriorating fastest in the G7, and if we’re not careful we may lose any advantage we currently have.

The G7 (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States) represents seven of the world’s most advanced economies and some of Canada’s closest peer countries. As such, many commentators, organizations and governments use Canada’s standing within the group as a barometer of our fiscal health. Indeed, based on his oft-repeated goal to “build the strongest economy in the G7,” Prime Minister Carney himself clearly sees the G7 as a good comparator group for Canada.

Two key indicators of a country’s finances are government spending and debt, both of which are often measured as a share of gross domestic product (GDP) to allow for comparability across jurisdictions with various sized economies. Government spending as a share of GDP is a measure of the overall size of government in a country, while government debt-to-GDP is a measure of a country’s debt burden. Both the size of government in Canada and the country’s overall debt burden have grown over the last decade.

This is a problem because, in recent years, government spending and debt in Canada have reached or exceeded thresholds beyond which any additional spending or debt will most likely harm economic growth and living standards. Indeed, research suggests that when government spending exceeds 32 per cent of GDP, government begins to take over functions and resources better left to the private sector, and economic growth slows. However, the issues of high spending and debt are often downplayed by comparisons showing that Canada’s finances aren’t as bad as other peer countries—namely the rest of the G7.

It’s true that Canada ranks fairly well among the G7 when comparing the aforementioned measures of fiscal health. Based on the latest data from the International Monetary Fund (IMF), a new study shows that Canada’s general government (federal, provincial and local) total spending as a share of GDP was 44.7 per cent in 2024, while Canada’s general government gross debt was 110.8 per cent of GDP. Compared to the G7, Canada’s size of government ranked 4th highest while our overall debt burden ranked 5th highest.

But while Canada’s size of government and overall debt burden rank middle-of-the-pack among G7 countries, that same study reveals that Canada is not in the clear. Consider the following charts.

The first chart shows the overall change in general government total spending as a share of GDP in G7 countries from 2014 to 2024. Canada observed the largest increase in the size of government of any G7 country, as total spending compared to GDP increased 6.34 percentage points over the decade. This increase was nearly three times larger than the increase in the U.S., and both France and Italy were actually reduced their size of government during this time.

The second chart shows the overall change in general government gross debt as a share of GDP over the same decade, and again Canada experienced the largest increase of any G7 country at 25.23 percentage points. That’s considerably higher than the next closest increases in France (16.97 percentage points), the U.S. (16.36 percentage points) and the U.K. (14.13 percentage points).

Simply put, the study shows that Canada’s finances have deteriorated faster than any country in the G7 over the last decade. And if we expand this comparison to a larger group of 40 advanced economies worldwide, the results are very similar—Canada experienced the 2nd highest increase in its size of government and 3rd highest increase in its overall debt burden, from 2014 to 2024. Some analysts downplay mismanagement of government finances in Canada by pointing to other countries that have worse finances. However, if Canada continues as it has for the last decade, we’ll be joining those other countries before too long.

Jake Fuss

Director, Fiscal Studies, Fraser Institute

Grady Munro

Policy Analyst, Fraser Institute

This article supplied by Troy Media.

By Perry Kinkaide and Bill Jones

It’s time Canadians admitted Alberta’s oilpatch pays the bills. Other provinces just cash the cheques

When Canadians grumble about Alberta’s energy ambitions—labelling the province greedy for wanting to pump more oil—few stop to ask how much
money from each barrel ends up owing to them?

The irony is staggering. The very provinces rallying for green purity are cashing cheques underwritten not just by Alberta, but indirectly by the United States, which purchases more than 95 per cent of Alberta’s oil and gas, paid in U.S. dollars.

That revenue doesn’t stop at the Rockies. It flows straight to Ottawa, funding equalization programs (which redistribute federal tax revenue to help less wealthy provinces), national infrastructure and federal services that benefit the rest of the country.

This isn’t political rhetoric. It’s economic fact. Before the Leduc oil discovery in 1947, Alberta received about $3 to $5 billion (in today’s dollars) in federal support. Since then, it has paid back more than $500 billion. A $5-billion investment that returned 100 times more is the kind of deal that would send Bay Street into a frenzy.

Alberta’s oilpatch includes a massive industry of energy companies, refineries and pipeline networks that produce and export oil and gas, mostly to the U.S. Each barrel of oil generates roughly $14 in federal revenue through corporate taxes, personal income taxes, GST and additional fiscal capacity that boosts equalization transfers. Multiply that by more than 3.7 million barrels of oil (plus 8.6 billion cubic feet of natural gas) exported daily, and it’s clear Alberta underwrites much of the country’s prosperity.

Yet many Canadians seem unwilling to acknowledge where their prosperity comes from. There’s a growing disconnect between how goods are consumed and how they’re produced. People forget that gasoline comes from oil wells, electricity from power plants and phones from mining. Urban slogans like “Ban Fossil Fuels” rarely engage with the infrastructure and fiscal reality that keeps the country running.

Take Prince Edward Island, for example. From 1957 to 2023, it received $19.8 billion in equalization payments and contributed just $2 billion in taxes—a net gain of $17.8 billion.

Quebec tells a similar story. In 2023 alone, it received more than $14 billion in equalization payments, while continuing to run balanced or surplus budgets. From 1961 to 2023, Quebec received more than $200 billion in equalization payments, much of it funded by revenue from Alberta’s oil industry..

To be clear, not all federal transfers are equalization. Provinces also receive funding through national programs such as the Canada Health Transfer and
Canada Social Transfer. But equalization is the one most directly tied to the relative strength of provincial economies, and Alberta’s wealth has long driven that system.

By contrast to the have-not provinces, Alberta’s contribution has been extraordinary—an estimated 11.6 per cent annualized return on the federal
support it once received. Each Canadian receives about $485 per year from Alberta-generated oil revenues alone. Alberta is not the problem—it’s the
foundation of a prosperous Canada.

Still, when Alberta questions equalization or federal energy policy, critics cry foul. Premier Danielle Smith is not wrong to challenge a system in which the province footing the bill is the one most often criticized.

Yes, the oilpatch has flaws. Climate change is real. And many oil profits flow to shareholders abroad. But dismantling Alberta’s oil industry tomorrow wouldn’t stop climate change—it would only unravel the fiscal framework that sustains Canada.

The future must balance ambition with reality. Cleaner energy is essential, but not at the expense of biting the hand that feeds us.

And here’s the kicker: Donald Trump has long claimed the U.S. doesn’t need Canada’s products and therefore subsidizes Canada. Many Canadians scoffed.

But look at the flow of U.S. dollars into Alberta’s oilpatch—dollars that then bankroll Canada’s federal budget—and maybe, for once, he has a point.
It’s time to stop denying where Canada’s wealth comes from. Alberta isn’t the problem. It’s central to the country’s prosperity and unity.

Dr. Perry Kinkaide is a visionary leader and change agent. Since retiring in 2001, he has served as an advisor and director for various organizations and founded the Alberta Council of Technologies Society in 2005. Previously, he held leadership roles at KPMG Consulting and the Alberta Government. He holds a BA from Colgate University and an MSc and PhD in Brain Research from the University of Alberta.

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