Economists at one of Canada’s biggest lenders are raising doubts about the fiscal plans offered by the leading parties in the country’s election.
Derek Holt and Rebekah Young, economists at Bank of Nova Scotia, both authored reports questioning the assumptions used in the Conservative and Liberal spending platforms, which were released in recent days.
Young’s analysis criticized the use of so-called dynamic scoring in the Conservative plan — the assumption of large revenues derived from tax cuts and deregulation unleashing stronger investment and economic activity.
The party expects to “lift output by half a trillion dollars over five years, suggestive of real GDP growth in the ballpark of four per cent annually,” she said. That’s well above the 1.7 per cent average pace over the next three years predicted by analysts surveyed by Bloomberg.
The International Monetary Fund cut its growth outlook on Tuesday, and economists have already started to trim their forecasts for Canada.
“Neither party is running on fiscal austerity,” Young wrote, adding that Conservative Leader Pierre Poilievre’s deficits are “marginally tighter” than the baseline projected by the Parliamentary Budget Officer in March — if one includes the generous revenue assumptions. Without them, Canada’s fiscal position worsens.
The Conservative platform outlines $100.6 billion (US$72.4 billion) in deficits by fiscal year 2028-29, but that includes dynamic revenues. When removed, the party’s planned deficits are closer to $156 billion over the next four years, according to Scotiabank’s analysis, compared to the Liberals’ $225 billion in shortfalls over the same period.
Both parties project $20 billion in retaliatory tariff revenue this fiscal year — an unlikely figure given that Prime Minister Mark Carney carved out some exemptions to the levies last week. And both are banking on finding efficiencies in the federal government, with Carney promising $32 billion in savings through improved productivity and a program review, and Poilievre expecting to save $23.5 billion from reduced consultant use.
“They’re all made-up numbers and promises, to be frank,” Holt wrote. Carney’s plan assumes a need to combat a long national crisis from U.S. President Donald Trump’s trade war, while at the same time ignoring the slowing economy that would result, Holt said.
“I’m personally more nervous about overdoing fiscal stimulus yet again by assuming a permanent crisis with no fiscal optionality along the way,” he added.
Holt also slammed politicians for offering their spending plans so late in the campaign — and after advanced voting for the April 28 election started last week.
“It’s shameful,” he said. “I don’t like seeing the electorate manipulated in such fashion.”
Kevin Page, the former parliamentary budget officer who’s now the president and chief executive officer of the Institute of Fiscal Studies and Democracy, noted in his reviews of the plans that neither incorporates the economic impact of the U.S. tariffs and global fallout.
He cautioned that reducing the deficit in a period of economic weakness caused by a trade war and high uncertainty, as the Conservatives are proposing, is unusual and typically not advisable for advanced economies with strong credit ratings.
Page also questioned the party’s use of dynamic scoring and said the Conservative assumptions were excessive compared with a Finance Department rule of thumb that sees a one per cent increase in real GDP generating a $5 billion to $6 billion reduction in the deficit after one year.
In a report to investors, RBC Dominion Securities strategists Jason Daw and Simon Deeley also warned about the assumptions made by both parties in their projections, pointing to the Liberals’ “opaque savings from government efficiency” and the Conservatives’ inclusion of “economic growth from policy changes as revenue.”
“In either election outcome, net bond issuance is very likely to hit the highest on record,” they added.
Erik Hertzberg and Mario Baker Ramirez, Bloomberg News
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