A parliamentary budget officer says Canada’s current fiscal policy is sustainable in the long term.

The latest report on fiscal sustainability issued by the PBO found that Canada’s public debt level is expected to steadily decline over time.

At the federal level, the report says the government can permanently increase spending or cut taxes by 1.8 percent of GDP. This amounts to $45 billion in current dollars.

Randall Bartlett, Canadian economist at Desjardins, said, “It’s generally a very good news story for Canada’s fiscal outlook.”

The annual report aims to identify any necessary changes to current fiscal policy to ensure that accumulating government debt does not become unsustainable.

It does this by assessing the net debt-to-GDP ratio.

The PBO’s assessment also includes federal and provincial budgets; in its evaluation of provincial, indigenous, and local governments, it warns that the fiscal policies of some governments are not sustainable.

The report says that in the long term, relative to the size of their economies, provinces will face rising healthcare costs due to an aging population.

However, most provinces have seen an improvement in their financial position since last year. Bartlett said, “It can be said that there is a fairly substantial improvement.”

The report states that the fiscal policy in Quebec, Alberta, Saskatchewan, and Nova Scotia is sustainable, while the remaining provinces and territories will need to reduce spending or increase taxes to achieve fiscal viability over time.

Bartlett said he was surprised by the improvement in Alberta’s and Saskatchewan’s fiscal standings, noting that the changes are likely a result of higher oil prices.

The report also highlights how Canada’s aging population is impacting economic projections, with growth expected to slow as the proportion of retired Canadians rises.

Bartlett said Canada’s demographic decline is “inevitable,” but some declines are offset by improved immigration levels.

He said, “There is kind of a broad consensus among the major parties anyway, that immigration is necessary to support Canada’s long-term economic growth and to offset the aging population that we have here.”

The report also evaluated the Canadian pension plan and the Quebec pension plan and found their structures sustainable in the long term.