OTTAWA (CUP) – Move over, students and youth. Canada’s aging population is set to be the government’s top priority in the next few decades, according to a new report released by Parliamentary Budget Officer Kevin Page.
Released Feb. 18, the independent and first-ever “Fiscal Sustainability Report” suggests that the long-predicted demographic shift of baby boomers moving from working age to retirement age is right around the corner, and it’s up to the government to take action sooner than later in order to ensure the country’s economy remains sustainable.
The report details the demographic issue is two-fold: not only will there be more pressure on the government to provide more funding for health care and elderly benefits and programs as Canadians hit retirement age, but the labour force will be effectively smaller – and so will the population from which the government collects its taxes.
“Although it is important to acknowledge that many elements of a long-term projection are uncertain, the demographic transition underway in Canada is not,” reads the report.
According to the budget officer, as of 2008, there were about five prime working-age Canadians (aged 15–64) for every individual aged 65 and over. This ratio is expected to drop to just under four-to-one by 2019 and 2.5-to-1 by 2033 – a considerable decline, yet one that has been present for decades: in 1971, there were approximately 7.8 workers for every retiree, according to the report.
Page is also projecting a decline in GDP growth – while the gross domestic product per capita has normally been growing by 2.1 per cent since the 1960s, the report suggests that going forward, Canadians will likely be seeing an average growth rate of only 0.9 per cent, until 2059.
The report states outright that the government’s current financial structure is not sustainable, as the national debt – more specifically, Canada’s debt-to-GDP ratio – is expected to increase substantially if the government continues to function as they are now. To achieve long-term financial sustainability, the report recommends “permanent fiscal actions” by way of increasing taxes, reducing program spending, or a combination of both to equal an amount between 1 and 1.9 per cent of GDP – a goal that, despite amounting to billions, the PBO emphasized is reachable.
“The fiscal action required to achieve sustainability does not need to be taken immediately … however, a significant delay in implementing fiscal actions substantially increases the required amount of corrective measures,” the report warns.
Page indicated that plans and transparent measures are necessary to get the country on the right track toward a sustainable economy.
“We do not have a fiscal plan with targets … With no targets, we have effectively no budget constraints and that encourages the government to balance and re-balance political priorities,” he noted at a public pre-budget debate on Feb. 3.
“The bottom line is, Canada has a fiscal gap. It is prudent to deal with it sooner rather than later.”
While the report provided extensive data to back up its financial and demographic projections, the budget officer stresses in its pages that it, “should not be interpreted as predictions of the most likely future outcomes. Rather, they are simply a set of ‘what if’ scenarios that attempt to illustrate and quantify the implications of leaving the government’s current fiscal structure unchanged over time.”
Canadians will see what financial plans the government has in store on March 4, when the 2010 federal budget is presented in Ottawa.
Published in Volume 64, Number 20 of The Uniter (February 25, 2010)