New evidence suggests Prime Minister Mark Carney's government might be falling into the same fiscal patterns that characterized Justin Trudeau's administration, according to recent research from the Frontier Centre for Public Policy.
Questionable Fiscal Forecasting
The study reveals that federal budgets during the Trudeau years consistently overestimated Canada's fiscal health in long-term economic projections. Policy analyst Conrad Eder found that when examining four-year economic forecasts, Trudeau-era budgets typically had forecast errors representing 4% of nominal gross domestic product, averaging $94.4 billion in miscalculations.
These overly optimistic growth projections led the previous government to make spending commitments based on anticipated revenue that never materialized. When economic reality failed to match government forecasts, federal deficits continued to grow beyond initial projections.
The Political Dimension of Budgeting
Eder's research indicates that political considerations significantly influenced how the Trudeau government framed its economic forecasts. Rather than focusing on Canada's long-term financial stability, the government prioritized political messaging through its budgetary presentations.
"When official projections consistently deviate from actual outcomes, they obscure the scope of deficits, inhibit effective fiscal planning, and mislead policymakers and the public," Eder writes in his analysis. This disconnect between projected and actual fiscal results undermines reliable long-term planning and damages public trust in government financial management.
By late 2024, the Liberal government's polling numbers had dropped into the high teens, trailing behind the NDP, largely due to eroding confidence in their fiscal stewardship.
Carney's Fiscal Credibility Test
Mark Carney was recruited as Liberal leader specifically to restore credibility after Trudeau's fiscal challenges. His background as Governor of the Bank of Canada during the Great Recession and subsequent leadership at the Bank of England positioned him as the antidote to Trudeau's perceived financial inexperience.
However, Carney's first budget presents concerning parallels. The current fiscal year's deficit is projected at $78.3 billion, with federal deficits expected to remain above $50 billion for at least the next four years according to Finance Minister François-Philippe Champagne.
Most notably, Budget 2025 revised economic growth projections for 2025 and 2026 from the previous fall economic statement, but left forecasts for 2027, 2028, and 2029 largely unchanged. This approach raises questions about whether the Carney government is employing the same optimistic long-range forecasting that plagued its predecessor.
If Eder's research holds true—that Liberal governments tend toward excessive optimism in four-year forecasts—then Budget 2025 should concern Canadians. The Carney administration didn't adjust the Trudeau government's 2029 economic projections by even a fraction of a percentage point.
For Carney to maintain the fiscal credibility that defined his pre-political career, his government must demonstrate greater transparency in how long-term economic projections are developed and clarify whether the finance department's forecasting methodology has evolved under new leadership.
Jay Goldberg, a fellow with the Frontier Centre for Public Policy, authored the original analysis examining these concerning fiscal patterns.
