Aging population issue must be addressed: watchdog

Canada's federal budget watchdog says the government's current fiscal structure is not sustainable if the demographic issue of the country's increasingly aging population is not addressed.

In a report released Thursday, the Parliamentary Budget Office said long-term projections suggest that an aging population means that growth in Canada's real gross domestic product per capita will fall by a little more than half over the next 50 years.

"After growing by 2.1 per cent, on average, since 1961, real GDP per capita growth is projected to average only 0.9 per cent from 2009 to 2059," the budget office said.

The PBO said permanent fiscal actions — either through higher taxes or program spending cuts, or both — are necessary to address a looming gap in government debt relative to GDP.

The budget office suggested that those actions — which would amount to one and 1.9 per cent of GDP under two alternative scenarios it laid out — are required.

A spokesman for Finance Minister Jim Flaherty took issue with some parts of the report.

"While we disagree with the implication that taxes need to be raised, we all appreciate the need for sound, long-term fiscal management," said Chisholm Pothier.

"We've been clear that once the economic recovery has taken hold, extraordinary stimulus spending will end, the economy will grow and we will undertake the necessary restraint in spending growth to reduce deficits."

The budget office noted that while many parts of its long-term projection are uncertain, it stressed that the demographic shift is not.

The watchdog said its report "should not be interpreted as predictions of the most likely future outcomes. Rather, they are simply a set of ‘what if’ scenarios that attempt to illustrate and quantify the implications of leaving the government’s current fiscal structure unchanged over time."