Report

Forecasting Federal Capital Expenses

Aug 14, 2025

The PBO’s fiscal model includes a federal capital spending module. This module has been expanded to more accurately measure federal investments in assets.

Highlights

In Spring 2025, the Government of Canada announced a shift in its fiscal policy to increase the rate of capital investment and place greater emphasis on acquisition of defence-related assets.
The Government has also established a new “Operating Budget” fiscal anchor. At this date, the composition of the “Operating Budget” has not yet been defined.
The Parliamentary Budget Office (PBO) is improving and expanding its modelling of capital spending. These changes are necessary to monitor the new fiscal regime. In addition, understanding non-operating spending is a starting point for measuring the new fiscal anchors.
To this end, the PBO has expanded the capital budget module in its fiscal model. Specifically, the model will now allow us to provide parliamentarians with a five-year projection of federal capital spending, amortization, and the accumulation of assets.
Overall, our new capital budgeting approach better reflects the anticipated increase in federal capital investments. Federal capital amortization expenses are $7.1 billion higher over the next five-years compared to our March 2025 Economic and Fiscal Outlook. This mostly reflects better data shared by National Defence.
For the first time, the PBO is now able to project federal capital spending, on a cash basis, of $128 billion for the next five years. Almost two-thirds ($83 billion) relates to National Defence.
In concert with expansions to the PBO personnel fiscal module, these changes will ensure parliamentarians receive regular updates regarding whether the government is on track to respect its fiscal anchors, as well as the new defence spending targets.