On Thursday, the federal government laid out its plan to assert Canada’s sovereignty in uncertain times, mainly through focusing on business investment and defence.
“The moment is serious,” Finance Minister Francois-Philippe Champagne said as he introduced the budget.
“Canadians know it. Our new government knows it. The moment demands an ambitious plan to be masters of our destiny.”
The budget, titled Masters of Our Destiny, promises $400 billion in capital investments over six years and $22 billion in new affordability measures.
These measures include a one-time increase to the Canada Groceries and Essentials Benefit. It would see a single adult receive up to $339 more early next year, and couples with two children receive up to $679 more.
Increasing this benefit would “provide a boost today and a bridge tomorrow,” Champagne told reporters Thursday afternoon, shortly before presenting the budget to the House of Commons.
The budget projects total revenues for the coming fiscal year at $540.3 billion, and total expenses at $602.6 billion. This would result in a deficit of $62.3 billion, up from $39.3 billion the previous year.
The continued deficit is a concern, says Ian Lee, a business professor at Carleton University.
“We’re nowhere near doing as well as the [federal government] claims we are,” he said.
A country’s deficit includes deficits of all levels of government, not just the federal government, he says.
“There is risk in maintaining such high levels,” he said, noting the provinces are also running deficits.
The budget’s focus on infrastructure spending and business investment shows that Prime Minister Mark Carney is “willing to bet the farm” on these being the best drivers of long-term economic growth, he said.
‘Path forward’
Canada’s uncertain trade relationship with the United States loomed large in the budget, with the government emphasizing the need for Canada to diversify its trading partners.
Still, the government remained cautiously optimistic about the future of the bilateral trade relationship.
“Canada’s new government continues to believe that a mutually beneficial trade agreement is achievable,” the budget says.
“In seeking that path forward, our position is clear: any trade deal must respect Canada’s sovereignty and the right of Canadians to determine our own economic future.”
The budget emphasized strengthening Canadian businesses.
It repeated the government’s announcement of a Productivity Mega Deduction, which will increase the range of investments where businesses can write off the total cost in the year they are made.
The deduction will make Canadian businesses more competitive with U.S. businesses, the budget says.
It introduces the Canada Growth Incentive, which includes a new tax exemption on up to $15 million in capital gains earned through investment in eligible Canadian companies.
It pledged to enhance the small business rollover to increase the deferral of taxes when capital gains are invested in another small Canadian business.
And it announced an additional $170 million to support training for workers whose jobs have been impacted by tariffs.
These measures will benefit business founders, employees and investors, the budget says.
Canada’s business community welcomed these announcements.
Goldy Hyder, president and CEO of the Business Council of Canada, said in a statement that “Canada could be on the cusp of an investment supercycle.”
“The ambition is there. Now we all need to focus on execution.”
Peter Copeland, deputy director of domestic policy at the Macdonald-Laurier Institute, says these business announcements “go in the right direction” for increasing productivity and competitiveness of Canadian businesses.
But in other ways, the budget “does not meet the moment,” Copeland said.
“We’re not dealing with deficit levels at all.”
Defence
The government reiterated its commitment to meeting the NATO target of spending five per cent of gross domestic product by 2035. NATO’s target is that countries spend 3.5 per cent on defence and 1.5 per cent on defence-related infrastructure.
In this fiscal year, the government projects spending about $54.6 billion on core defence. While this is more than double the spending of five years ago, current projections do not put Canada on track to meet the NATO target.
The budget announces Canada’s intention to join the European Union’s €90-billion Ukraine Support Loan, which would enable Canadian companies to compete for €60 billion in Ukrainian defence procurement.
The government first announced it would join this loan at last week’s Canada-EU summit, and is reported to have made an initial €500-million commitment to the loan facility.
The budget also includes $7.6 billion over five years to extend and expand Operation Reassurance, the Canadian Armed Forces’ deployment in Latvia aimed at deterring Russian aggression.
The budget addresses the recent tragedy at CFB Wainwright in Alberta. It dedicates $3 million this year to support the Wainwright Military Family Resource Centre, and $25 million over the next two years to support families and communities impacted by this tragedy.
‘Not inevitable’
The budget’s emphasis on defence extends into Ottawa’s infrastructure plans.
The government announced it plans to create a new agency to manage the projects approved by the Major Projects Office.
One of these projects is the Mackenzie Valley Highway, an approximately 800-kilometre road that will connect Wrigley and Inuvik, N.W.T. The year-round highway has the dual purpose of connecting remote communities and defending Canada’s sovereignty, the budget says.
This and other defence projects “allow us to concurrently solidify our defence presence while developing the immense, nation-building potential of the critical minerals and trade corridors in Canada’s North,” the budget says.
The budget also prioritizes housing infrastructure, and says it plans to end homelessness within 10 years.
“Homelessness is not inevitable,” the budget says.
“It is the result of gaps across housing, health, mental health, addictions and social support systems.”
The budget proposes to give $3.6 billion over four years to Build Canada Homes for supportive and transitional housing beginning in 2027-2028.
And it pledges $1.8 billion over the same period to support projects that bring together housing and health programs, including mental health and addictions support.
The budget additionally proposes to provide Build Canada Homes with $13 billion over 10 years, beginning in 2028-2029, to create non-market housing that offers below-market rents.
Going forward, the government projects revenue to increase 16 per cent over four years. It estimates the deficit will narrow from $62.3 billion this fiscal year to $52.9 billion in 2030-2031.
The government does not project a balanced budget in the forecast period.
