 "Mark Carney's government presented its first budget in the Parliament today. Reuters")
Canadian Prime Minister Mark Carney has unveiled his first budget, which lays out an ambitious plan to face the challenges posed by President Donald Trump’s punitive tariff measures and thereby transform Canada’s economy.
The budget, dubbed an “investment budget”, was presented by the Finance Minister François-Philippe Champagne and includes big-ticket items that are expected to bring the economy out of a slump it has been witnessing, but also provides cuts to public services at the same time.
“To weather the storm of uncertainty, we will not lower our sails,” Canada’s Finance Minister François-Philippe Champagne said while presenting his budget to parliament. “We will raise them – to catch the winds of economic change,” he added.
Champagne said the budget will invest over $280 billion over the next five years into infrastructure, defence, housing and enhancing productivity and competitiveness, with almost $40 billion flowing before March 2026.
The budget was dominated by the US tariffs that sent shockwaves to Canada’s economy earlier this year. It talks about high levels of uncertainty caused by Trump’s actions and is almost like a cheat sheet on how to deal with tariffs.
The highlights
Canada’s new fiscal plan projects $141 billion in additional spending over the next five years, balanced by $51.2 billion in cuts and savings. The government expects a $78 billion deficit this fiscal year, which is lower than many economists anticipated. To rein in costs, it plans to trim nearly 40,000 public-sector jobs through buyouts and attrition.
Impact Shorts
More ShortsA significant $51 billion infrastructure investment aims to drive economic development, with major projects such as high-speed rail, new ports, and carbon capture and storage likely to gain approval in the near future. The budget also includes an $81 billion funding package for the Canadian Armed Forces, tied to a new Buy Canadian procurement strategy.
Champagne proposed two main fiscal anchors for the government: to balance the operating budget by 2028/29 and maintain a declining deficit-to-GDP ratio.
Its deficit to GDP is expected to be at 2.5 per cent for the year ending March 2026, up from 1.2 per cent last year, but tapers down to 1.5 per cent in the next five years, the document showed.
The government plans to bring in up to $60 billion of savings under its comprehensive review program started in July in a bid to shrink its public service sector. The government will also improve tax collection and cut foreign aid, the budget said.
What changes?
On the policy front, immigration levels will be sharply reduced, with temporary residents, including international students and foreign workers, cut by nearly 50 per cent. Meanwhile, the government’s previously proposed emissions cap may be abandoned altogether, signalling a shift in climate policy priorities.
The budget also proposes downsizing the public service sector, which saw a slew of appointments during the COVID-19 era. These cuts will be made under a “workforce adjustment”, where Ottawa will offer buyouts for eligible bureaucrats and attrition to whittle the public service down from a peak of 368,000 to 330,000 by the end of 2028-29.
Several initiatives are being reduced or restructured to save the federal government tens of billions of dollars. Programs such as the two-billion-tree planting effort are being scaled back, and Ottawa will cut spending on medical cannabis for veterans. The plan also includes adjusting how public sector pensions are indexed to inflation, consolidating diplomatic properties abroad, and reducing foreign aid to pre-pandemic levels, among many other cost-saving measures.
With inputs from agencies