OTTAWA — Canadians worried about federal deficits should look at the country’s strong standing with international credit-rating agencies for some reassurance, Prime Minister Justin Trudeau says.
Trudeau said Canada’s triple-A rating with agencies like Moody’s Investors Service and Standard & Poor’s should provide comfort to taxpayers who fear his government has been accumulating too much debt.
Trudeau insisted Canada’s high rating scores mean experts have confidence in his government’s approach to the economy.
He made his argument as critics, and especially the Conservatives, warn Ottawa should be curbing deficit-spending in the stronger-than-expected economy.
Debate over the state of Canada’s books could turn into a key ballot-box issue ahead of next October’s federal election — and it could become particularly interesting if the Liberals are forced to navigate a downturn between now and then.
“This question around deficits, obviously, has been one that has led to a lot of conversations, a lot of attacks or critiques from our political opponents, the legitimate questions from journalists and, quite frankly, worries from Canadians,” Trudeau said in an interview last Friday with The Canadian Press.
“Who are the experts in terms of sustainability of a fiscal plan? I’d suggest that the international bond ratings agencies — S&P, Moody’s and those folks know what they’re talking about … The fact that the international ratings agencies are giving us a thumbs up right now should reassure people.”
Asked about the next downturn or recession, Trudeau argued his government’s moves to boost immigration and to make investments in areas like skills training, infrastructure and a lower-carbon economy have made Canada more resilient against future shocks.
He also said his government’s child-benefit enhancements and income-tax reductions for middle earners have also improved the resilience of Canadian households.
The Trudeau Liberals were elected in 2015 on a pledge to run modest annual shortfalls of no more than $10 billion and to balance the books by 2019. Instead, they’ve posted yearly deficits almost double that size and no longer have a timetable to return to balance.
After taking office, the Trudeau government shifted its focus to keeping the government’s debt burden — as measured by Ottawa’s net debt-to-GDP ratio — on a slight downward track.
Experts, however, have cautioned that the debt-to-GDP ratio will be thrown off course in a downturn, leaving Ottawa to search for another so-called “fiscal anchor” to keep spending in check.
Trudeau said the debt-to-GDP is a “benchmark we’re going to stick to.”
He was also asked if the public should expect the next Liberal election platform to focus on debt-to-GDP rather than another promise to balance the books.
“We’re certainly going to be making decisions about how to demonstrate our fiscal responsibility and nothing has been finally decided yet, but I think the debt as a share of GDP is a very handy and important way of measuring how sustainable a fiscal plan is,” he said.