Report

Stress Testing the Government’s Fiscal Anchor and Fiscal Objective

Jan 30, 2025

This report provides a “stress test” of the Government’s fiscal anchor and fiscal objective by estimating the likelihood that the Government’s fiscal plan presented in the 2024 Fall Economic Statement, when subject to both economic and fiscal shocks, will reduce the federal debt-to-GDP ratio over the medium term and will keep deficits below 1 per cent of GDP beginning in 2026-27.

Highlights

Based on historical shocks to debt drivers and the baseline projection from the 2024 Fall Economic Statement, PBO estimates that there is a 61 per cent chance that the Government’s fiscal anchor will be achieved over the medium term. That is, there is a 61 per cent chance that the federal debt-to-GDP ratio in 2029-30 will be below its 2023-24 level of 42.1 per cent.
PBO estimates that there is an 18 per cent chance that the Government’s fiscal objective will be achieved. That is, there is an 18 per cent chance that deficits in each and every year over 2026-27 to 2029-30 will not exceed 1 per cent of GDP.
To increase the probability of achieving the Government’s fiscal anchor to 80 per cent, PBO estimates that additional fiscal adjustment of 1.3 percentage points of GDP, phased in gradually over the medium term, would be required. This would represent $50 billion in higher revenues or lower program spending by 2029-30 relative to the Government’s fiscal plan presented in the 2024 Fall Economic Statement.