Prime Minister Mark Carney’s Liberal administration presented its inaugural budget on Tuesday, heralding “a fresh era of leadership and a new economic groundwork.” The extensive 406-page proposal outlines substantial cuts and investments amounting to billions, aimed at boosting growth and productivity amid trade uncertainties and an economic slowdown.
Key highlights of the Liberals’ 2025 budget include a projected deficit of $78 billion for 2025-26, expected to decrease to $65 billion in the next fiscal year before gradually declining to $57 billion by 2029-30. The budget commits to balancing operational spending within three years, albeit this year’s deficit surpasses the previous Liberal government’s $42 billion target and the Conservatives’ support threshold.
Moreover, the budget introduces approximately $141 billion in new spending over the next five years, offset in part by significant cuts and savings. Ottawa is undergoing a “comprehensive expenditure review” to reduce federal government operational expenses, aiming to save $13 billion annually by 2028-29, totaling $60 billion in savings over five years.
Furthermore, the budget emphasizes redirecting taxpayer funds towards nation-building infrastructure, clean energy, innovation, and productivity, while reducing day-to-day operating expenditures. This shift in focus is intended to safeguard social benefits while streamlining government operations, leading to a projected reduction of around 40,000 public service positions in the coming years.
In a bid to invigorate economic growth, the government is implementing measures to enhance Canada’s investment climate to outperform the U.S. The budget introduces a “productivity super-deduction” tax provision allowing companies to expedite write-offs for capital investments. Additional measures target expediting write-offs for manufacturing and processing facilities, as well as offering a new capital cost allowance for liquefied natural gas (LNG) equipment and related infrastructure.
Carney’s administration is committed to fast-tracking infrastructure projects in Canada, with initiatives like the Major Projects Office already operational. The budget allocates $214 million over five years to approve critical mineral projects and expedite construction on the Toronto-Quebec City high-speed railway within four years, rather than the initially planned eight years. Furthermore, $51 billion over a decade is earmarked for local infrastructure projects to create job opportunities.
On the immigration front, the government aims to lower admission targets in a move deemed as “taking back control” over the immigration system. The plan includes reducing temporary resident admissions from 673,650 in 2025 to 385,000 in 2026, while maintaining permanent resident admission targets at 380,000 annually. The budget also proposes transitioning up to 33,000 work permit holders to permanent residency in 2026 and 2027 to support the economy and address labor shortages.
A significant boost in defence spending is promised, with the budget earmarking $81.8 billion over five years, including substantial investments in recruiting and retaining Canadian Armed Forces members, enhancing CAF capabilities, and bolstering defence infrastructure. The Communications Security Establishment is set to receive funding to enhance its digital infrastructure for modern warfare, including cyber defense capabilities.
Additionally, the budget outlines plans to eliminate high-end taxes, including the underused housing tax on vacant or underused properties and the luxury tax on aircraft and boats above specific price thresholds. These tax cuts are aimed at simplifying Canada’s tax system, reducing compliance burdens for taxpayers, and cutting administrative costs for the government.
