The truth about Canada's debt ratio

The Liberal government has, for years now, made a virtue of claims that Canada has the lowest net-debt-to-GDP ratio among G7 countries. The Conservative opposition, predictably, say that this is misleading, and a better measure is the gross-debt-to-GDP ratio, in which Canada appears as, not the worst, as they often try to insinuate, but somewhere in the middle. 

Conservative mouthpieces like the Fraser Institute, for example, can smugly claim that "we're deeper in debt than Ottawa tells us". But that is at least as disingenuous as the original Liberal claim. Both parties are cherry-picking data to suit their political ends.

What, then, is the truth behind it all?

Firstly, it is worth looking at what "net" and "gross" actually mean in this context. Gross debt is the total public liabilities held by a country (federal, provincial and municipal), including things like Treasury bonds, public service pension liabilities, etc. Net debt is gross debt minus public financial assets held (land, buildings, financial assets like pension plans, etc). Which you consider the better measure of a country's financial health seems largely to be a political decision: there is merit in both measures.

In comparative terms, Canada is indeed a leader in net-debt-to-GDP: its ratio in 2023 was just 14%, compared to Germany and USA (both 95%), France 99%, Italy (129%) and Japan (161%). This is in large part due to the substantial non-government investments of the Canada Pension Plan and the Quebec Pension Plan.

In gross-debt-to-GDP, Canada had a ratio of 107% in 2023, less than France (111%), USA (123%), Italy (135%) and Japan (249%), but more than UK (101%) and Germany (63%). All in all, not a bad showing,  and below the G7 average. It is also projected to improve by 2029, putting it second behind only Germany in the G7.

There are those who argue that net-debt-to-GDP ratio is actually a superior measure of a country's financial health and strength. Whatever you think about that, it's certainly a stretch to argue that Canada's public debt is out of hand and that it's all the Liberal government's fault over the last ten years.