Wellington Dupont's 2026 Spring Economic Update Summary

This afternoon, the Minister of Finance, the Hon. Francois-Philippe Champagne, tabled the 2026 Spring Economic Update (SEU), entitled Canada Strong For All, in the House of Commons. Coming on the one-year anniversary of the unexpected 2025 Liberal election victory, the 178-page publication largely represents a continuation of the plan set out by Prime Minister Mark Carney during the campaign as well as through last fall’s 2025 federal budget. SEU 2026 also comes on the heels of the Carney government officially attaining a full parliamentary majority, which was confirmed yesterday with the swearing in of three Liberal MPs elected earlier this month in by-elections. These three seats, in addition to five MPs who have joined the Liberal caucus from the Conservative and NDP ranks, officially give the Liberals 174 seats, versus 169 for the opposition (140 Conservatives, 22 Bloc Québecois, 5 NDP, 1 Green, and 1 Independent). With the government now having an outright majority of votes in the House as well as around committee tables (through changes pushed through yesterday), the government now has a stronger and more stable control over the legislative agenda than at any point since 2019.

SEU 2026 builds on Carney’s previous “Building Canada Strong” framework for governing, maintaining a focus on major infrastructure projects, housing, economic growth and trade diversification, as well as security and defence initiatives. The newly announced measures - including a new sovereign wealth fund to be styled the Canada Strong Fund (CSF), announced by the Prime Minister earlier today, as well as a slate of measures targeting skills training and workers branded as Team Canada Strong - appear aimed at broadening the “inclusivity” of Carney’s approach. It serves as a mid-year fiscal update and progress check on Budget 2025, introducing $37.5 billion in net new spending ($54.5 billion including measures announced since the fall budget).

The update is being delivered against a backdrop of ongoing trade tensions with the United States, with CUSMA renegotiations unresolved and a July deadline looming. The news is not all sombre, however. In his speech to the House, Champagne touted that Canada remains the second-fastest growing economy in the G7, all while the government remains on track to balance “day-to-day operating spending with revenues” by 2028-29, with the projected 2025-26 deficit being reduced by $11.5 billion compared with projections in the 2025 Budget six months prior. The government is also claiming credit for a nearly two-decade high in foreign direct investment, attracting nearly $100 billion over the course of the previous fiscal year. This is a trend it hopes to continue, including by hosting a Canada Investment Summit in Toronto this September, as announced earlier this month.

Opposition Reaction

As expected, the government’s update was met with criticism from opposition parties. Conservative Party leader Pierre Poilievre criticized the decision to use the better-than-expected federal revenues for new spending initiatives as opposed to focusing on balancing the books. He has also characteristically labeled the CSF as a “Liberal slush fund.” Meanwhile, both the Bloc Québecois and NDP raised concerns that the Canada Strong Fund was designed to benefit the oil and gas sector, while also outlining a variety of areas where they felt government efforts have fallen short with respect to affordability measures and social programs.

Economic Outlook and Fiscal Projections

• Economic Growth: Canada is projected to be the second fastest-growing G7 economy in 2026, as per the International Monetary Fund (IMF), with a growth rate of 1.5%, behind the United States at 2.3%.
  
  • The IMF forecast is more bullish than that of private-sector economists surveyed by the government, where growth of only 1.1% was projected (below the levels anticipated by Budget 2025), as well as lower than the 1.7% growth in real GDP seen in 2025.
  • The IMF expects all five other G7 members to see growth below 1%.
  • For 2027, Canada is expected to close the gap with the United States, with growth accelerating to 1.9% and U.S. growth falling to 2.1%, with Germany and the U.K. also expected to see their growth rates rebound to 1.2% and 1.3%, respectively.
  • Notably, real GDP per capita grew by 0.6% in 2025, after seeing declines in both 2023 and 2024.
• Jobs: Since the start of 2025, Canada has added 3.4 jobs per 1,000 people, compared to 1.2 jobs per 1,000 people in the United States, with the majority of new jobs being in the private sector.
  
  • Unemployment peaked at 7.1% in September 2025 before falling to 6.7% in March 2026, below the level expected in last fall’s budget. It is expected to average 6.5% in 2026, below Budget 2025 expectations of 6.8%.
  • Wage growth has now outpaced inflation for more than three consecutive years, supporting continued gains in real incomes.
• Inflation: Inflation average 2.1% in 2025, slowing to 1.8% in February 2026 prior to the renewal of conflict in the Middle East. It is expected to average 2.5% 2026 before falling to 1.9% in 2027.
  
  • Despite the resulting pressures driven by higher energy prices, inflation only rose to 2.4% in March, having remained within the Bank of Canada’s target range of 1 to 3% for 27 consecutive months.
  • While shelter price inflation slowed to 1.7% in March 2026 0 the lowest level since 2021 and around its 2010 - 2019 average, rent inflation (4%) and grocery inflation (4.4%) have remained higher.
  • Oil is expected to average $US 73 per barrel in 2026, compared to a Budget 2025 forecast of $65 per barrel, though this is expected to revert to expected levels of $66 per barrel by 2027, though recent developments over the past month could see these peak higher than anticipated.
• Trade: Canada continues to have the lowest average tariff rate among all major U.S. partners, at 5.2%, and sees approximately 85% of Canadian exports continue to enter the U.S. tariff-free under the Canada–United States–Mexico Agreement (CUSMA).
  
  • Non-U.S. goods exports are up by roughly 36% since 2024, with a notable acceleration over the past 12 months.
• New Spending: Contains $37.5 billion in net new spending, in addition to $54.5 announced over the past six months since the unveiling of Budget 2025.
• Deficit: Projected to be $66.9 billion for 2025-26, coming in $11.5 billion under the original forecast from Budget 2025. This is due to revenues increasing by $7.2 billion compared to projections.
  
  • The government expects the “day-to-day operating deficit” to achieve balance in 2028-29, though this papers over a projected “capital spending” deficit expected to remain north of $50 billion annually through 2030-31 and beyond.
  • Given Canada’s position as an exporter of oil, higher or persistent oil prices as a result of conflict in the Middle East would see the deficit reduced as a result.
• Debt: Federal debt as a percentage of GDP is expected to be 41.5% in 2025, peaking at 41.9% in 2028 before gradually declining year-over-year.
  
  • Canada's net debt-to-GDP ratio (including assets held in pension funds such as the Canada Pension Plan) stands at just 10.2%, the lowest in the G7 and far below the G7 average (excluding Canada) of 101.8%.
  • Canada and Germany are the only two G7 economies to maintain AAA ratings from all major global credit rating agencies.

Canada Strong Fund (CSF) - A New Sovereign Wealth Fund

• Announced by the Prime Minister earlier in the day, SEU 2026 includes the announcement that the federal government will create Canada’s first sovereign wealth fund, entitled the Canada Strong Fund.
• The federal government will make an initial contribution of $25 billion over three years to the CSF, which will invest in transformative Canadian projects and companies, with the energy (both clean and conventional), critical minerals, agriculture, and infrastructure sectors specifically highlighted.
• In addition to the federal government’s contribution, Canadians will also be able to invest their savings in the CSF through a “broadly accessible retail investment product” that the government says will be simple for Canadians to “purchase, hold, or transact.” The CSF will also ensure investors’ initial capital is protected.
• Focused primarily on equity stakes, the CSF will initially target projects referred by the Major Projects Office (MPO) and companies or projects already receiving federal support. It will seek to complement existing support provided by the Canada Infrastructure Bank (CIB), Export Development Canada (EDC), the Business Development Bank of Canada (BDC), and the Canada Indigenous Loan Guarantee Corporation.
• The new “independent, professional” and “performance-focused Crown Corporation will be managed at arm’s length from the government by a CEO and board of directors. This process will be managed by a new CSF Transition Office ($6 million over five years, starting in 2026-27), following targeted engagement with market participants and regulators.

Team Canada Strong - A new federal skilled workers strategy

• SEU 2026 outlines that Canada will need more than 1.4 million additional trades workers by 2033 due to retirements and economic growth, with planned investments in housing and infrastructure adding to this demand. The government estimates that this has created a persistent gap of more than 20,000 new skilled trades workers every year.
• Branded as Team Canada Strong, the government is committing to a new plan to recruit, train, and hire 80,000 to 100,000 new Red Seal trades workers aligned with Canada’s housing, infrastructure, resource development, and defence needs by 2030-31. The plan ($6 billion over five years starting in 2026-27, with $793 million ongoing) commits to cutting the timeline in half and includes four steps for those looking to pursue a career in the skilled trades.
  
  • An initial job placement of up to 4-months.
  • On-the-job training for registered apprentices, either with an employer or at a union training centre, with SMEs being eligible to receive a wage incentive of up to $10,000.
  • Completion of technical training at a college and through an employer or union training centre, with support from a weekly $400 Apprenticeship Grant, as well as income supports for those caught between training and work.
  • A $5,000 completion bonus upon receipt of Red Seal certification, prior to starting a career as a Red Seal tradesperson.
• The plan also includes a number of other new initiatives
  
  • Hands-on training through Cadets and Junior Rangers programs, and piloting fully-funded trades training through the Canadian Armed Forces Primary Reserve.
  • Increasing the annual limit on expenses via the Labour Mobility Deduction for Tradespeople from $4,000 to $10,000, indexed annually to inflation, and reducing the minimum distance threshold for relocations from 150 km to 120 km.
  • Reducing CPP-based rate contributions from 9.9% to 9.5% starting January 1, 2027.
  • Making the $10 million Employee Ownership Trust (EOT) capital gains tax exemption in effect from 2024 to 2026 permanent.

Natural Resources‍

• As previously announced, the government is accelerating economic growth, increasing power generation, and making supply chains more secure. The government is building a regulatory framework that yields timely and predictable decisions, aligns economic and environmental priorities, and meaningfully engages with Indigenous communities.  
• The federal government will amend the Physical Activities Regulations, which sets out the types of projects that are subject to the Impact Assessment Act, to advance the principle of “one project, one review.”some text
  • This will include only physical activities (classes of projects that are subject to a federal impact assessment) that carry high potential for impacts in areas of federal jurisdiction, consistent with the revised Act.  
  • This will remove some physical activities so as to rely to a greater degree on federal lifecycle regulators, such as solely having the Canadian Nuclear Safety Commission's process apply to certain brownfield nuclear projects, as opposed to also requiring a federal impact assessment.
  • This will focus the scope of impact assessments of provincially regulated projects, like mines, exclusively on effects in federal areas of jurisdiction. This will expedite assessments and reduce duplication with provincial and territorial assessments, thereby improving investor certainty and review timelines. 
  • As announced in Budget 2024, following consultation with Indigenous Peoples, establish a Crown Consultation coordinator to ensure meaningful Crown consultation with First Nations, Métis, and Inuit communities on the issuance of federal authorizations, to improve efficiency and reduce consultation fatigue.

Legislating A Standalone Defence Investment Agency (DIA)

• SEU 2026 also announces new funding of $103.8 million over five years starting in 2026-27, with $22.3 million ongoing, to establish and operate the DIA as a standalone agency.
• Announced last fall and currently existing as a Special Operating Agency within Public Services and Procurement Canada, the government plans to introduce legislation to establish the DIA as a standalone departmental agency.
  
  • This legislation will also establish a new cabinet position responsible for the agency, and give the new minister expanded financial and transactional authorities under the Defence Production Act.

Other New and Notable Initiatives

• Accelerated Capital Cost Allowance Rates for Low-Carbon Liquefied Natural Gas Facilities: Eligibility would require expected emissions intensity of an LNG facility's on-site liquefaction activities, measured in tonnes of carbon dioxide equivalent per tonne of LNG produced annually (tCO₂e/tLNG), would have to be less than or equal to 0.20 tCO2e/tLNG (50% for liquefaction equipment and 10% for facility non-residential buildings).
• Advance Tax Rulings for Major Projects: The Canada Revenue Agency (CRA) will begin prioritizing requests for advance income tax rulings related to large nation-building projects (such as housing and infrastructure as well as projects of national importance.
• Airports: New legislation to require aerodrome operators and associated third parties to provide information to the government, as part of a planned modernization of the governance of airport authorities.
• Artificial Intelligence (AI) Strategy: SEU 2026 signals continued delays as to the launch of the federal government’s much-anticipated Artificial Intelligence Strategy, with there still being no firm timeline for its launch. The government did nevertheless outline six pillars that will comprise the forthcoming strategy:
  
  • Protecting Canadians and Safeguarding Democracy: Modern privacy and online safety laws, strong national AI safety capabilities, and secure government systems.
  • Empowering Canadians: Access to AI training and education for all Canadians, as well as representing and including Canadian voices, languages, and culture.
  • Powering AI Adoption for Shared Prosperity: Developing pro-worker, industrial AI technologies, supporting accelerated AI adoption among SMEs, and transforming public service delivery to deliver better services to Canadians.
  • Building the Canadian Sovereign AI Foundation: Supporting the building of sovereign computer infrastructure at scale that is resilient, sustainable, and under Canadian governance, while growing Canada’s pool of AI researchers and talent.
  • Scaling Canadian Champions: Unlocking growth capital and leveraging government as a strategic anchor customer.
  • Building the Canadian Sovereign AI Foundation: Supporting the building of sovereign computer infrastructure at scale that is resilient, sustainable, and under Canadian governance, while growing Canada’s pool of AI researchers and talent.
  • Scaling Canadian Champions: Unlocking growth capital and leveraging government as a strategic anchor customer.
  • Building Trusted Partnerships and Global Alliances: Working with trusted partners to align standards, co-invest in innovation, and help Canadian companies access global markets while shaping an AI ecosystem anchored in democratic values.
• Housing Affordability: Additional measures to enable a more modern and efficient regulatory environment for factory-built housing and modern construction practices, amending mortgage insurance rules to permit private insurers to offer multi-unit insurance on five- to eight-unit residential properties and to increase flexibility of products for new three- and four-unit housing, and accelerating the roll-out of low-cost loans under the previously announced Apartment Construction Loan Program.
• Indigenous Investments: Additional funding commitments on-reserve education focused initiatives aimed at ensuring First Nations youth can participate fully in Canada’s skilled workforce ($601 million in 2026-27), continuing to support Indigenous communities in exercising their jurisdiction with respect to children, youth, and family services ($700 million over 6 years, starting in 2025-26), and a top-up to the Non-Insured Health Benefits Program (NIHB) for First Nations and Inuit ($794 million in 2026-27).
• Whole-of-Government Competition Plan: The government has also announced their intention to launch a plan aimed at removing inefficient government policies that impede competition arising from regulation, procurement, and industrial support.