{"id":15495,"date":"2026-10-02T15:37:47","date_gmt":"2026-10-02T15:37:47","guid":{"rendered":"https:\/\/www.rbc.com\/en\/economics\/?p=15495"},"modified":"2026-10-15T13:59:43","modified_gmt":"2026-10-15T13:59:43","slug":"public-sector-key-to-canadas-investment-boom-inside-provincial-capital-plans","status":"publish","type":"post","link":"https:\/\/www.rbc.com\/en\/economics\/canadian-analysis\/featured-analysis\/insights\/public-sector-key-to-canadas-investment-boom-inside-provincial-capital-plans\/","title":{"rendered":"Public sector key to Canada’s investment boom: Inside provincial capital plans"},"content":{"rendered":"\n
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Public investment accounts for a larger share of Canada’s capital spending (\u2018capex\u2019) than commonly understood, and provinces are the heavy hitters.<\/p>\n\n\n\n

But, now that the era of steadily rising provincial government capex is reaching fiscal limits, the burden is increasingly shifting to Ottawa.<\/p>\n\n\n\n

Here are four things to know about the importance of public investment, the debt consequences of provinces\u2019 post-pandemic capital surge, emerging constraints on further increases, and a growing federal role in public capex funding.<\/p>\n\n\n\n

1. Governments are big capital spenders with provinces in the lead<\/h2>\n\n\n\n

Governments\u2019 role in Canada\u2019s investment spending is bigger than what standard metrics imply.<\/p>\n\n\n\n

Macroeconomic accounts put the government share of capex at 18% in 2025, yet this excludes government business enterprises (GBEs)\u2014many of which are capex-heavy such as BC Hydro or Ontario\u2019s Metrolinx.<\/p>\n\n\n\n

When you include GBEs, the public share of capex jumps to 26%, while reaching 40% for non-residential tangible assets (i.e., non-housing, non-intellectual property), which are at the heart of the federal government\u2019s planned investment boom.<\/p>\n\n\n\n

Provincial governments own 45% of public capital assets, followed by local governments and then provincial GBEs. Funding for public capex has also been predominantly provincial, although comprehensive official data is scant.<\/p>\n\n\n\n

Using public accounts data for Ottawa and the big four provinces1<\/a><\/sup>, we estimate the provincial funding share was at least 75% in 2024\u201325 among senior governments (federal plus provincial, excluding GBEs and municipalities).<\/p>\n\n\n\n

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2. Post-pandemic capex surge pushed provincial government debt higher<\/h2>\n\n\n\n

Gross real investment in provincial government capital assets has risen in recent years, while outpacing depreciation to also yield net asset additions. Much of this was self-funded. Capital spending by at least the big four provinces has also been on an uptrend.<\/p>\n\n\n\n

The post-pandemic economy was conducive to rising provincial investment.<\/p>\n\n\n\n

Provinces emerged from COVID-19 with debt-to-GDP ratios largely unscathed\u2014Ottawa absorbed most pandemic support\u2014while the nominal growth boom initially improved deficits and debt ratios. Infrastructure deficits and rapid in-migration then drove capex higher, still growing on a real per capita basis. Low interest rates (at the start) would keep the added debt serviceable.<\/p>\n\n\n\n

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While capex does not affect government deficit and some debt metrics the same as other spending, it does raise net debt, a measure important for investors (see below).<\/p>\n\n\n\n

Combined with large operating deficits, strong capex has seen provinces collectively use material fiscal space. The acquisition of non-financial assets accounted for 26% of provincial net borrowing between 2021 and 20252<\/a><\/sup>.<\/p>\n\n\n\n

Yet this story varies across provinces. Some have seen big capital plans contributing to rapidly increasing net debt burdens (British Columbia and Maritime provinces), while others have had more success containing recent debt burden increases (Ontario and Quebec) or benefit from stronger starting points (Alberta and Saskatchewan).<\/p>\n\n\n\n

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