Prime Minister Mark Carney's first federal budget proposes C$280 billion in new spending over five years, combined with workforce reductions and other cuts. The plan aims to strengthen Canada's economy, address challenges from US tariffs, and attract C$1 trillion in investment. The budget projects Canada's second-largest historical deficit, C$78 billion, and requires parliamentary approval.
Budget Overview
The budget, presented by Prime Minister Mark Carney's government and Finance Minister François-Philippe Champagne on Tuesday, is the first under Carney's leadership since taking office earlier this year. It outlines new spending initiatives alongside reductions in government operations.
Economic Context and US Tariffs
Finance Minister Champagne stated that Canada is experiencing "a time of profound change" and requires "bold and swift action." The budget document frequently references uncertainty and the need for protectionist measures in response to US tariffs. President Donald Trump has implemented a broad 35% levy on Canadian goods not covered by existing free trade agreements, as well as tariffs on specific sectors such as steel, aluminum, and automobiles earlier this year. These tariffs have resulted in Canadian job losses in affected sectors, and business leaders have expressed concerns about a potential reduction in investment due to trade uncertainty.
Spending Initiatives
To counter the impact of tariffs and enhance the economy, the budget proposes C$280 billion in spending over the next five years. This investment is designated to "strengthen Canada's productivity, competitiveness, and resilience." Specific initiatives include:
- Trade Infrastructure: Updating ports and other trade infrastructure with the goal of doubling Canadian exports to non-US markets within the next decade.
- Business Support: Providing direct financing to firms affected by tariffs.
- Competitiveness Boost: A plan to increase Canada's competitiveness, aiming to make it a more attractive business environment than the United States.
- Defence: A pledge of nearly C$82 billion over five years, representing the largest defence funding in decades. This aims to align Canada with its NATO commitment of spending 2% of its GDP on its military by the current year.
- Artificial Intelligence: Nearly C$1 billion proposed to boost the integration and use of AI technology, including within government operations.
The government states its spending is intended to prevent the elimination of "vital social programmes" and funding for Canada's future, with a goal to attract C$1 trillion of investment into Canada over the next five years.
Fiscal Details and Deficit
The budget projects an increase in Canada's deficit to C$78 billion ($55.3 billion; £42.47 billion), which would be the second largest in the nation's history. Despite this, the fiscal plan asserts that Canada maintains the lowest deficit-to-GDP ratio in the G7, behind only Japan.
Government Reductions and Other Measures
Ahead of the budget, Prime Minister Carney indicated that "sacrifices" would be necessary. Planned reductions include:
- Federal Workforce: A reduction of the federal workforce by approximately 10%, leading to an estimated 40,000 job losses by 2029.
- International Aid: Cuts to international aid, returning it to pre-pandemic levels.
- Immigration: Lowered immigration targets over the next three years to "stabilise" new admissions, including a reduction in student visas.
Parliamentary Approval
The budget requires passage by Canada's Parliament to be implemented. The Liberal government, being three seats short of a majority, will need support from other parties. Failure to pass the budget could lead to a federal election.
- Conservative Opposition: Conservative leader Pierre Poilievre has stated a preference for an "affordable budget" that would limit Canada's deficit to C$42 billion.
- New Democratic Party: Members of the New Democratic Party have indicated they will not support an "austerity budget."
Neither party has yet disclosed how they will vote on the proposed budget.