Government Consumption & Investment

Government spending increased steadily over the years surrounding the recession, as the government directed significant funding toward stimulus packages to jumpstart the Canadian economy. More recently, that bill has come due, and government spending fell in 2011 for the first time in 15 years. Growth in government spending remained tepid in 2012, largely due to cuts to public services, prisons, environment protection, border security, TV and other programs. Growth in government expenditure remained subdued over 2015, as the federal government continued to focus on reducing the debt and deficit. Since then, growth in government spending has been largely driven by the rising cost of healthcare, as well as the Investing in Canada plan that focuses on revamping the country's infrastructure. In fact, government outlay growth in 2017 and 2018 were higher than any year since 2010.

Due to severe economic deterioration in 2020 stemming from the pandemic, government spending tempered significantly, increasing just 1.4% in 2020 alone. In 2021, government spending rebounded sharply, with an increase of 4.9% as the economy began to recover amid vaccine rollouts and additional spending to boost the economy. As the economy continues to recover from the pandemic, government spending began to slow in 2022. Spending is expected to increase in 2023 as the government offers consumer relief programs in response to inflation, which has been compounding due to the ongoing Ukraine war affecting the supply of necessary commodities. The Bank of Canada’s 2023 guidance did not include any interest rate increases, noting a lack of movement in inflation. Interest rates have begun to go down towards the end of 2024 as inflation has descended. Government spending is estimated to increase an annualized 3.0% over the years to 2025.