March Questions & Answers and March Graph
Q: I understand Canada's government sector has been shrinking for several years. How does Canada's experience compare to that of other countries?
A: Canada's government-sector-spending-to-Gross-Domestic- Product (GDP) ratio peaked in 1992 and has fallen every year since except for 1998 when it rose by 0.2. Almost all of the 25 OECD countries that report this ratio reached a post-war peak in 1992 or 1993. Table 1 shows government sector spending as a percent of GDP for OECD countries in 1990 and 2000. The March Graph shows this percentage from 1990 to 2001 for the G7 countries as well as the average for the OECD. New Zealand was the first to turn the corner after reaching spending of 48.8 percent of GDP in 1990. Japan, Germany, France, Austria, Finland, Korea, and Portugal plan to spend more in 2000 than in 1990, although the 2000 ratio for all of these countries except Japan will be down from peak spending. Figure 1 shows the years that each of the 25 countries reached or will reach their maximum ratio. The Czech Republic reaches the maximum ratio in the latest year for which data is available (2001). There is no way to know if this will be a maximum or not.
| Country | 1990 | 2000 | Difference |
|---|---|---|---|
| United States | 33.6 | 29.9 | (3.7) |
| Japan | 31.3 | 38.4 | 7.1 |
| Germany | 43.8 | 46.8 | 3.0 |
| France | 49.3 | 51.5 | 2.2 |
| Italy | 53.1 | 47.5 | (5.6) |
| United Kingdom | 41.8 | 39.5 | (2.3) |
| Canada | 46.7 | 40.9 | (5.8) |
| Australia | 33.6 | 32.5 | (1.1) |
| Austria | 48.6 | 49.1 | 0.5 |
| Belgium | 53.3 | 50.0 | (3.3) |
| Czech Republic |
n/a | 45.4 | n/a |
| Denmark | 56.0 | 54.1 | (1.9) |
| Finland | 44.5 | 45.2 | 0.7 |
| Greece | 51.0 | 48.7 | (2.3) |
| Hungary | n/a | 43.4 | n/a |
| Iceland | 36.6 | 35.0 | (1.6) |
| Ireland | 37.8 | 29.2 | (8.6) |
| Korea | 18.1 | 24.4 | 6.3 |
| Nether- lands |
49.4 | 43.2 | (6.2) |
| New Zealand |
48.8 | 39.7 | (9.1) |
| Norway | 49.7 | 44.9 | (4.8) |
| Poland | n/a | 42.4 | n/a |
| Portugal | 40.6 | 44.1 | 3.5 |
| Spain | 39.7 | 38.0 | (1.7) |
| Sweden | 56.4 | 54.7 | (1.7) |
| OECD average |
38.3 | 37.7 | (0.6) |
| Source: OECD, OECD Economic Outlook 66, December 1999. | |||
| 1990 | New Zealand |
| 1992 | United States, Canada, Ireland, Netherlands, Norway |
| 1993 | France, Italy, United Kingdom, Australia, Austria, Belgium, Denmark, Finland, Hungary, Poland, Portugal, Spain, Sweden |
| 1995 | Greece, Iceland |
| 1996 | Germany |
| 1999 | Korea |
| 2000 | Japan |
| 2001 | Czech Republic |
Q: Canada's fiscal situation has improved recently. How many other industrialized countries have improved their fiscal balances recently, and how many of these countries expect to collect more revenue in 2000 than in 1990?
A: Of the 25 countries shown in table 2, 17 show an improvement in fiscal balance (the shaded rows) between 1990 and 2000 or 2001, 4 show a surplus for both periods, 1 expects a deterioration, and 3 have incomplete data. An improvement is defined as a decrease in the deficit-to-GDP ratio, or moving from deficit to surplus. Of the 17 countries with an improvement, 14 expect higher or equal revenue as a percent of GDP; the only exceptions are Ireland, the Netherlands, and New Zealand. Germany may soon join these three as it recently proposed significant tax cuts, including cutting corporate income tax rates from the current 40 to 25 percent next year, eliminating the corporate tax on capital gains next year, and cutting the top personal income tax rate from 53 to 45 percent over five years.
| General Government Financial Balances, Percent of GDP | General Government Current Tax and Non-tax Receipts, Percent of GDP | |||||
|---|---|---|---|---|---|---|
| 1990 | 2000 | Balance: | 1990 | 2000 | Receipts are: | |
| United States | (4.3) | 0.9 | improved | 29.3 | 30.8 | higher |
| Japan | 2.9 | (7.9) | deteriorated | 34.2 | 30.5 | lower |
| Germany | (2.0) | (1.2) | improved | 41.8 | 45.6 | higher |
| France | (1.6) | (1.7) | improved by 2001 | 47.7 | 49.8 | higher |
| Italy | (11.0) | (1.6) | improved | 42.1 | 45.9 | higher |
| United Kingdom | (1.5) | 0.8 | improved | 40.3 | 40.3 | unchanged |
| Canada | (4.5) | 1.6 | improved | 42.1 | 42.5 | higher |
| Australia | (1.3) | 0.5 | improved | 32.3 | 33.0 | higher |
| Austria | (2.4) | (2.5) | improved by 2001 | 46.2 | 46.6 | higher |
| Belgium | (5.4) | (0.9) | improved | 47.9 | 49.1 | higher |
| Czech Republic | n/a | (5.4) | n/a | n/a | 40.0 | n/a |
| Denmark | (1.0) | 2.2 | improved | 55.0 | 56.3 | higher |
| Finland | 5.4 | 4.4 | in surplus | 49.9 | 49.6 | lower |
| Greece | (16.1) | (1.6) | improved | 34.9 | 47.2 | higher |
| Hungary | n/a | (4.0) | n/a | n/a | 39.4 | n/a |
| Iceland | (3.3) | 1.6 | improved | 33.3 | 36.7 | higher |
| Ireland | (2.8) | 3.8 | improved | 35.0 | 32.9 | lower |
| Korea | 3.8 | 0.4 | in surplus | 21.8 | 24.8 | higher |
| Netherlands | (5.7) | (0.2) | improved | 43.7 | 43.0 | lower |
| New Zealand | (4.7) | 0.6 | improved | 44.0 | 40.3 | lower |
| Norway | 2.6 | 6.5 | in surplus | 52.3 | 51.4 | lower |
| Poland | n/a | (2.4) | n/a | n/a | 40.0 | n/a |
| Portugal | (5.1) | (1.6) | improved | 35.5 | 42.5 | higher |
| Spain | (4.1) | (1.1) | improved | 35.6 | 36.9 | higher |
| Sweden | 4.0 | 2.1 | in surplus | 60.5 | 56.8 | lower |
| OECD average | (2.7) | (1.1) | improved | 35.5 | 36.7 | higher |
| Source: OECD, OECD Economic Outlook 66, December 1999. | ||||||
March Graph - Government Spending as a Percent of GDP, 1990-2001
Source: OECD, OECD Economic Outlook 66, 1999
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