Report

Economic and Fiscal Outlook – September 2025

Sep 25, 2025

This report provides a baseline projection to help parliamentarians gauge potential economic and fiscal outcomes under current policy settings.

Highlights

PBO has revised down its economic outlook. Reflecting increased trade uncertainty and the implementation of tariffs, real GDP growth is projected to average 1.2 per cent annually over 2025 and 2026. While economic growth is projected to rebound to 1.8 per cent in 2027, structurally weaker trade conditions are expected to lower the level of real GDP by 0.5 per cent by 2030.
Nominal GDP—the broadest measure of the Government’s tax base—is projected to be $12.9 billion lower annually, on average, over 2025 to 2029 primarily due to the lasting impact of tariffs and less favourable trading conditions with the United States.
PBO’s status quo fiscal outlook includes new measures announced since the 2024 Fall Economic Statement amounting to $115.1 billion in (net) new spending over 2024-25 to 2029-30.
PBO projects the budgetary deficit to increase sharply from $51.7 billion (1.7 per cent of GDP) in 2024-25 to $68.5 billion (2.2 per cent of GDP) in 2025-26 reflecting weaker economic growth and additional measures impacting both revenues and expenses.
Assuming no new measures are introduced and existing temporary measures sunset as scheduled, the budgetary deficit is projected to decline slightly but remain close to $60 billion through the medium term as growth in revenues only slightly outpaces growth in expenses.
Due to persistent budgetary deficits of over 1 per cent of GDP, the federal debt-to-GDP ratio is projected to increase from 41.7 per cent in 2024-25, rising above 43 per cent over the medium term. Compared to our March outlook, the federal debt-to-GDP ratio is 4.5 percentage points higher in 2029-30 and is no longer projected to be on a declining path over the medium term.