As we head into budget season for the federal and provincial governments, the economics team at CIBC Capital Markets has put its finger on an issue that is no doubt worrying finance ministers throughout the country — closing the gap between revenues and expenses.
The bank says a few years ago inflation was the finance department’s friend when it led to increased consumer spending which translated into stronger sales tax receipts. But now it is the exact opposite as debt servicing costs are taking a bigger bite and there are no political brownie points to be earned with this one.
And the low unemployment rate – the last time a finance minister had rates like these was in the 70s – is not helping as productivity is down and an aging population means more people outside the workforce demanding government services.
And, finally, there is government itself. They have been adding significantly to the public payroll, especially at the federal level as the rate of public workers to the overall population has never been higher, according to the CIBC report.
