By Paul Vieira


OTTAWA--Canadian Prime Minister Justin Trudeau said Tuesday he wasn't keen to restrain government spending despite warnings his administration's fiscal plans are in danger of entering risky territory.

"My focus needs to be and will continue to be on how we're there to support Canadians in a challenging time, and how we create greater growth and opportunities for them in the years to come," Trudeau said at a cabinet retreat in Montreal. "And that doesn't come with austerity and cuts, as proposed by many members of the business community and by many, many Conservative Party politicians."

The Conservative Party holds a hefty lead over the incumbent Liberals in nearly all public-opinion polls, partly on a message that the Trudeau administration's spending and tax policy has helped fuel inflation and made life more unaffordable for Canadian households.

On Monday, the Business Council of Canada--which represents blue-chip chief executives--said the Liberal government was at risk of missing its fiscal target of keeping the annual budget deficit below 1% of gross domestic product until the 2026-27 fiscal year. At present levels, assuming no new taxes and the economy unfolds as the Bank of Canada has forecast, the business council said Liberal government would need to cut spending each year by about 12 billion Canadian dollars, or the equivalent of US$8.9 billion, to hit its 1% GDP target.

"Given your government has increased expenses annually, on average, by well over 5% each year since 2016, the proposed [fiscal] anchor is just not credible," the council's president, Goldy Hyder, said in a letter to Trudeau dated Jan. 21.

The council added there are other reasons Canada is unlikely to meet its fiscal targets. First, spending demands, most notably from increased benefits for ageing Canadians, the transition to a cleaner-energy economy, and defense outlays amid a changing geopolitical outlook. And second, a less-than-stellar outlook for Canada's economy, in which labor productivity has been in decline.


Write to Paul Vieira at paul.vieira@wsj.com


(END) Dow Jones Newswires

01-23-24 1217ET