Prime Minister Mark Carney has committed to significantly lowering the annual increases in the federal government's operating costs. However, a recent report from Parliamentary Budget Officer Yves Giroux indicates that Carney faces substantial challenges ahead.

According to the report, if current trends continue, the cost of government personnel, which is the largest part of the federal operating budget, is expected to rise from $71.1 billion last year to $76.2 billion by 2030. This increase could add $8.5 billion to the federal deficit over the next five years, averaging about $1.7 billion annually.

The number of full-time equivalent (FTE) employees in the federal government is projected to grow to nearly 442,000 during this period, up from 438,600 this year. The average cost of each FTE, which includes salaries, pensions, and other benefits, is anticipated to exceed $172,000 by 2030, compared to nearly $162,000 this year.

Giroux's calculations do not account for the Carney government's commitment to boost national defense spending to 2% of Gross Domestic Product this fiscal year. Additionally, the government has initiated a review aimed at reducing operational spending by 7.5% next year, 10% the following year, and 15% in 2028-29.

During the federal election, Carney criticized the previous Liberal government led by Justin Trudeau for allowing operational spending to grow at an annual rate of 9%. Carney argued that this increase contributed to the poor state of the Canadian economy, even before the trade tensions initiated by U.S. President Donald Trump.

In his upcoming budget, set to be released in October, Carney has pledged to "spend less and invest more" with a goal of balancing the federal budget within three years. To achieve this, he plans to distinguish between operating expenses—such as daily operations and cash transfers to provinces, as well as benefit programs like Old Age Security, $10-a-day daycare, and dental care—and capital spending on infrastructure.

However, redefining debt in this manner raises concerns, as it remains a burden for taxpayers who will ultimately bear the cost with interest.