Overall, government balances should improve in 1997. Provincial balances continue to improve, but slowly. Assuming there are no major changes to the public pension systems, they should continue to register modest deficits. Taking all levels of government together, we expect the change in the primary surplus will increase to indicate an even tighter fiscal thrust for the year. After 1997 We assume that deficit reduction will remain the principal focus of Finance ministers and Treasurers to at least the end of the decade.
Primary surpluses continue at high levels throughout the projection.
In that context, we assume governments will judge that the re-making of the public sector has been completed after 1998. From that point forward, real spending increases to approximately match the growth of demands coming from increased numbers of patients, students, households, and other demographic indicators. Notice, however, that this would not reflect increases sufficient to introduce new programs, or to renovate older programs that had produced undesirable economic or social outcomes. As a baseline, or reference, view of the future, we are assuming that the US economy can continue to grow steadily through 2005. There are risks to this view.