Ottawa’s new budget shifts spending to growth and infrastructure
Canada’s federal government unveiled a 2025 budget that marks a sharp pivot from previous years, with prime minister Mark Carney’s first fiscal plan prioritizing long-term investments over program spending, even as the deficit rises to $78.3 billion.
The budget, tabled Tuesday, outlined $141 billion in new spending offset by $51 billion in cuts and savings, including a 10% reduction in the federal civil service.
“We are making generational investments to meet the moment and ensure our country doesn’t just weather this moment but thrives in it,” François-Philippe Champagne, minister of Finance and National Revenue, said.
“This is our moment to build Canada Strong and our plan is clear – we will build our economy, protect our country, and empower you to get ahead.”
The government’s plan rests on $280 billion in investments over five years, with $115 billion earmarked for infrastructure, $110 billion for productivity and competitiveness, $30 billion for defense and security, and $25 billion for housing.
Defense spending alone will reach $81.8 billion over five years, not including major equipment purchases.
Ottawa’s approach comes amid a challenging economic backdrop. Unemployment is rising, productivity remains sluggish, and GDP growth is forecast at just 1% annually for the next two years.
The Bank of Canada recently cut its growth outlook, and some economists had anticipated a higher deficit.
The budget also introduces new legislation on open banking and stablecoin regulation, and trims immigration targets starting in 2026.
For the mortgage and housing sector, the $25 billion housing allocation and new infrastructure commitments are expected to support construction and affordability initiatives.
Some business leaders and policy experts flagged the government’s fiscal guardrails as weaker than in previous years. The debt-to-GDP ratio is projected to rise from 42.4% to 43.3% by 2028, with public debt charges climbing to 13% of federal revenue by 2030.
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