Summary and Analysis
This afternoon, Finance Minister François-Philippe Champagne delivered the 2025 Budget in the House of Commons. Titled “,” the document comes largely as forecast, emphasizing major infrastructure projects and trade diversification while also attempting to begin reigning in government spending.
The document contains many previously announced initiatives, including Build Canada Homes, the Defence Investment Agency, the re-skilling announced earlier this fall, investments in defence and border security, as well as the Major Projects Office and the new Build Canada Act framework for projects of national interest. Key new items include a new Build Communities Strong Infrastructure Fund, a Productivity Super-Deduction for business investment, details on Canada’s Climate Competitiveness Strategy, and the introduction of the Trade Diversification Corridors Fund, initially proposed in the Liberal platform last spring. It also contains a revised Immigration Levels Plan for 2026 – 2028, containing further reductions in admission targets for both permanent and temporary residents.
The Budget projects a deficit of $78.3 billion in 2025-26, declining to $56.6 billion by 2028-29, by which point the government commits that spending on operations (i.e. excluding capital spending) will be balanced with revenue. With projected economic growth taking a hit over the next two years due to global trade challenges as well as declining population growth, the government is shifting its fiscal anchor to a declining deficit-to-GDP ratio moving forward. It will achieve this by balancing $89.7 billion in new spending ($32.5 million from capital spending), with $60 billion in spending reductions. The result is a forecast elimination of 16,000 full-time equivalent public servant positions, with an overall drop in the federal workforce from its 2023-24 high of 368,000 to a projected 330,000 by 2028-29. On a global scale, the document outlines that Canada’s net debt-to-GDP burden will remain the lowest in the G7 at 13.3%, and that the meagre growth forecast will nevertheless place second among G7 peers.
Initial reaction to the government’s plan from opposition parties has largely been negative: the Greens, Bloc Québecois, and Conservatives have all indicated they will not support it, and while the NDP has left the door open to support the budget after further study, it will likely be tough for them to support. While Nova Scotia Conservative MP Chris d’Entremont was kicked out of caucus after news broke this afternoon that he was considering defecting to the Liberals, even his tentative support still leaves the Liberals two votes shy of what the Prime Minister requires to survive upcoming confidence votes. Attention will turn tomorrow to the first of up to four days of debate on a motion to approve the Budget, when the Conservatives and Bloc Québécois will propose their own amendments.
Budget Highlights:
Economic Resilience: Tariff Response and Trade Diversification
- The launch of the Climate Competitiveness Strategy will accelerate investment to drive down emissions in key industries, increase market access for Canadian exports, and grow jobs and the economy.
- Creation of Canada’s first whole-of-government National Anti-Fraud Strategy to implement stronger protections for Canadians.
- To spur economic growth and investment, the Productivity Super-Deduction will introduce a new set of tax incentives allowing businesses to write off a larger share of the costs related to investment. This includes:
- The reinstated Accelerated Investment Incentive will provide an enhanced first-year write-off for most capital assets.
- Immediate expensing of:
- Manufacturing or processing machinery and equipment.
- Clean energy generation, energy conservation equipment, and zero-emission vehicles.
- Productivity-enhancing assets, including patents, data network infrastructure, and computers.
- Capital expenditures for scientific research and experimental development.
- Manufacturing or processing buildings that are acquired on or after Budget Day and are used for manufacturing or processing before 2030. This measure will be phased out between 2030 and 2033.
- Launch of the Strategic Exports Office to create a pipeline of international business opportunities and build roadmaps for Canadian senior-level engagement to open doors and remove roadblocks for Canadian companies.
- $8 million over four years, starting in 2026-27, and $2 million ongoing, to deepen trade relationships with Europe with new trade missions.
Environment
- Develop effective carbon markets, enhance oil and gas methane regulations, and deploy technologies at scale to create circumstances where the oil and gas emissions cap is not necessary.
- Incentives for the Medium-and Heavy-Duty Zero-Emission Vehicles Program will end by 2025-26.
Defence and National Security
- $617.7 million over five years to hire 1,000 additional Canada Border Services Agency officers.
- $1.8 billion over four years to expand federal policing, including 1,000 new RCMP personnel focused on organized crime and online fraud.
- The creation of a Financial Crimes Agency to bring together the expertise necessary to investigate money laundering, fraud, and online financial scams.
- The creation of the new Defence Investment Agency (DIA) to streamline defence procurement.
- $68.2 million to establish the Bureau of Research, Engineering and Advanced Leadership in Innovation and Science (BOREALIS).
- $81.8 billion over five years, starting in 2025-26, to rebuild and reinvest into the Canadian Armed Forces (CAF).
- $10.9 billion over five years, to upgrade digital infrastructure within the Department of National Defence, CAF, and Communications Security Establishment.
Infrastructure and Transport
- $5.0 billion over seven years, starting in 2025-26, to create the Trade Diversification Corridors Fund.
- $51 billion over 10 years, starting in 2026-27, to launch the Build Communities Strong Fund. This includes:
- $17.2 billion over 10 years through a Provincial and Territorial Stream for housing enabling infrastructure, and health-related infrastructure. $5 billion over three years through this stream has been allocated to the Health Infrastructure Fund.
- $6 billion over 10 years, starting in 2026-27, allocated towards the Direct Delivery Stream to support regionally significant projects, large building retrofits, climate adaptation, and community infrastructure.
- The Canada Community-Building Fund becomes the Community Stream with $27.8 billion over 10 years, starting in 2026-27.
- Through the Major Projects Office, the government intends to develop transformative energy and trade corridors, including the Port of Churchill Plus project.
- Increase the Canada Infrastructure Bank’s statutory capital envelope from $35 billion to $45 billion to enable the Canada Infrastructure Bank to make investments in nation-building projects that have been referred to the Major Projects Office.
- $371.8 million over four years, starting in 2026-27, to create the First and Last Mile Fund. This will support the development of critical minerals projects and supply chains with a focus on getting near-term projects into production.
Labour Market and Immigration
- Launch of a Foreign Credential Recognition Action Fund with $97 million over five years to accelerate integration of internationally trained workers.
- $75 million over three years, starting in 2026-27, to expand the Union Training and Innovation Program, which aims to support union-based apprenticeship training in the Red Seals trades.
- The 2026-2028 Immigration Levels Plan will stabilize permanent resident admission targets at 380,000 per year for three years, which is down from 395,000 in 2025. There will be an increase in the share of economic migrants from 59% to 64%. This plan will also reduce the target for new temporary resident admissions from 673,650 in 2025 to 385,000 in 2026, and 370,000 in 2027 and 2028.
Families
- $216.6 million per year, starting in 2029-30, to make the National School Food Program permanent.
- Launch of Automatic Federal Benefits to ensure 5.5 million low-income Canadians automatically receive benefits by 2028.
Artificial Intelligence
- $925.6 million over five years, starting in 2025-26, to support large-scale sovereign public AI infrastructure that will boost AI compute availability and support access to sovereign AI compute capacity.
- The Minister of Artificial Intelligence and Digital Innovation will engage with industry to identify new AI Infrastructure projects and enter into Memoranda of Understanding for those projects.
- $656.9 million over five years, starting in 2025-26, to develop and commercialize dual civilian-military technologies in aerospace, automotive, marine, cybersecurity, artificial intelligence, biodefence, and life sciences industries.
- The Canada Infrastructure Bank will be able to invest in AI infrastructure projects.
Health
- $97 million over five years, starting in 2026-27, to create the Foreign Credential Recognition Action Fund.
- The creation of the Personal Support Workers Tax Credit for eligible Personal Support Workers employed outside of British Columbia, Newfoundland and Labrador, and Nunavut, allowing personal support workers to claim up to 5% of their eligible earnings.
Social Policy and Culture
- $660.5 million over five years and $132.1 million annually after, to boost women's leadership, provide security for LGBTQ communities at Pride events, and fund crisis hotlines and gender-based violence research.
- The Canada Periodical Fund will be refocused to incentivize the creation of original Canadian editorial content and will no longer fund paid subscriptions and single-copy sales.
- The Canada Cultural Spaces Fund will be reoriented to focus on funding specialized equipment in the cultural sector to offer a cost-effective method to upgrade cultural facilities.
