Carney’s 2nd budget earmarks billions for affordability and Canadian sovereignty
Prime Minister Mark Carney’s second federal budget allocates tens of billions of dollars in new spending to tackle what the government describes as the twin challenges of our time: improving affordability in an era of high prices and securing Canada’s sovereignty as it faces external threats.
The budget’s new big-ticket items include generous tax measures designed to prompt an “investment supercycle,” increased GST rebates to help with the cost of living, an $11.2-billion cash injection to tackle homelessness and one of the largest investments in Canadian arts, culture and identity in recent history to bolster national pride.
Buoyed by a spike in oil prices that delivered a financial windfall for Ottawa, the budget calls for about $142 billion more in spending over the next five years than was originally planned in the spring economic update.
All of that is more than offset by increased revenue — about $158.3 billion more over the next half-decade — from the oil and gas boom and an economy performing better than expected.
However, Ottawa is still projecting deficits for the foreseeable future: $62.3 billion for the 2026-27 fiscal year, declining only slightly in the following years, as Carney signals he’s unwilling to cut deeply while the economy remains relatively vulnerable given global events.
The government’s preferred fiscal anchor, the deficit-to-GDP ratio, is on a downward trajectory because the economy is expected to grow faster than spending in the years to come.
Finance Minister François-Philippe Champagne claims this shows the government is fiscally prudent.
“The moment is serious. Canadians know it. Our new government knows it. The moment demands an ambitious plan to be masters of our destiny,” Champagne said, alluding to U.S. President Donald Trump’s trade war that has tested the country’s economic resilience.
“We need to do more to build this country.”
“It’s the next big step in our action plan to make this country more independent, more sovereign, masters of our destiny so we can live our lives as we wish,” Carney added.
Still, the budget reveals that the combination of increased spending and higher interest rates will spike public debt charges.
Just as many homeowners and businesses are facing increased costs because of rates, the government must allocate much more money each year for the foreseeable future to pay bondholders carrying its debt.
The cost to finance Canada’s roughly $1.3-trillion national debt will jump from $60.2 billion in 2026-27 to $85.5 billion in 2030-31, exceeding what the government spends on some crucial programs like the Canada Health Transfer and equalization.
While that is much higher than in the recent past, Sahir Khan, the executive vice-president at the Institute of Fiscal Studies and Democracy, said the government’s “fiscal sustainability is intact.”
“Many of the government’s new initiatives are measured, means-tested, timely and targeted,” Khan said in an interview.
Canada’s sterling AAA credit rating, relatively strong GDP growth and healthy balance sheet mean that, “compared to everybody else, we’re looking really shiny,” he said.
Conservative Leader Pierre Poilievre says the Liberals should have named the budget, ‘mastered by debt,’ saying their plan will inflate the prices of essentials and make life more unaffordable for Canadians.
Conservative Leader Pierre Poilievre, meanwhile, blasted the budget as too expensive and ineffective.
“This prime minister will inflate the cost of fuel, food and homes. This is a costly credit card budget that Canadians can’t afford and Conservatives will vote ‘no,'” Poilievre said.
“This is the single biggest borrowing binge in Canadian history,” he said.
The government faces acute political pressure to do more to help Canadians grappling with affordability concerns as inflation and conflicts abroad push up the cost of staples like food and gas.
To address criticism that it hasn’t done enough to help shoulder that burden, this budget offers a one-time 50 per cent top-up to the GST rebate which has been rebranded as the groceries and essentials benefit, delivering up to $2,570 in cash payments this year to an eligible family of four, according to government estimates. About 12 million people qualify for these payments.
Ottawa is also dropping the threshold so many more low-income families can qualify for the renamed Build Canada Workers Benefit to help them make ends meet while wage growth continues to lag inflation.
There’s also a more generous caregivers’ benefit to help people looking after loved ones and a big boost to the Nutrition North program to offset food costs in remote areas, among other measures in a $22-billion plan designed to alleviate cost pressures.
While he applauded its measures to combat homelessness, NDP Leader Avi Lewis said Prime Minister Mark Carney’s second federal budget is lacking ‘the things that lower Canadians’ actual cost of living.’
NDP Leader Avi Lewis said Ottawa’s budget doesn’t go far enough to help people in need. He said the federal government needs to build a network of government-owned grocery stores and ban “surveillance pricing” to try and help make food more affordable.
“The masters of our destiny in Budget 2026 is not you and your family, it’s members of the billionaire class that the prime minister invited to his investment summit,” Lewis said.
As Trump unleashes an economic assault on the Canadian economy through punishing tariffs on key industrial products, the government is allocating billions for a “productivity mega-deduction” to jumpstart investment.
That deduction allows businesses of all sizes to immediately write off investments like building new plants, purchasing equipment or software and laying railway tracks or pipelines, among thousands of other possible actions.
The government says this huge federal expense — it’s set to cost a stunning $36 billion over five years — makes the Canadian business tax regime the most competitive in the developed world.
This measure alone is expected to boost GDP growth by about 0.5 per cent, which is significant considering the overall growth rate next year is forecast to be about two per cent.
Ottawa also revealed new details about its Canada Strong Fund, a new Crown-controlled sovereign wealth fund that will initially deploy about $25 billion to take ownership stakes in some major projects and businesses.
Individual Canadians will have a chance to share in the fund’s potential success by purchasing “Canada Strong Notes.”
These are savings bond-like products that will allow people to invest a certain amount — the principal is protected, regardless of how the fund performs — collect yearly interest income and then make potentially more money if the underlying investments perform well over time. These notes will be available through banks starting in 2027.
There’s also a new “Canada growth incentive,” a tax measure that allows entrepreneurs to avoid taxes on up to $15 million in capital gains if those funds are ploughed back into a Canadian business — a measure designed to stop startups, particularly in the tech sector, from fleeing to the U.S.
Finance Minister François-Philippe Champagne drew applause and heckling from opposition members as he spoke on Thursday, promising a federal budget that will unlock Canada’s ‘full growth’ potential.
Carney has tried to revive national pride and interest in history throughout the first 20 months of his prime ministership and this budget allocates much more money to artists, authors, historians, museum curators, media outlets and others to better tell the country’s stories and bolster its cultural industries.
With the country’s 160th anniversary next year, the government wants “every Canadian to read and tell our stories, gather in the places that bring us together and celebrate what it means to be Canadian,” according to the budget backgrounder provided to reporters.
CBC/Radio-Canada is getting $300 million more in funding over the next two years.
There’s millions of dollars in new funding to create a national digital collection so people can read some 2,000 Canadian books for free.
Canada’s national museums, which haven’t seen major funding increases in years, are getting $843 million over five years to improve their offerings and draw in more people to learn about the country’s past.
To help with that, elements of the Canada Strong Pass will become permanent meaning children and youth can continue to visit these museums for free.
That pass can also be used at some of Canada’s national parks and historic sites. The budget allocates some $3.6 billion over the next 10 years to Parks Canada to protect and expand the country’s most significant places, collections and experiences.
The National War museum is pictured in Ottawa in 2024. (Sean Kilpatrick/The Canadian Press)
To better commemorate the country’s military accomplishments, Veterans Affairs Canada is getting more money to, among other things, better mark important moments like the upcoming 110th anniversary of the Battle of Vimy Ridge and acquire and remediate the existing National Field of Honour, where thousands of service members are buried.
And to protect hockey’s place in national life, the budget includes $1.5 billion in new funding to build, expand or retrofit rinks across the country.
“This is an historic investment in telling our stories,” Champagne said.
The sovereignty investments don’t stop at the cultural sector.
The budget also includes major new investments in Operation Reassurance — Canada’s ongoing military mission in Latvia to deter Russia — and more cash to procure in-demand drones.
The defence budget is exponentially larger than in the recent past and his moving higher still — the budget lays out a five-year roadmap to get to $157 billion in annual spending by the end of the decade — as Carney moves aggressively to fulfill NATO commitments and ramp up spending to reach the Western military alliance’s targets.
Prime Minister Mark Carney speaks to members of the Canadian Armed Forces during their lunch at the Adazi Military base in Adazi, Latvia on Wednesday, Aug. 27, 2025. (Christinne Muschi/The Canadian Press)
As energy demands surge and Carney signals he wants to prioritize “nation-building” projects, the government is committing an eye-popping $50 billion over multiple years to build out the electricity grid.
That funding will effectively double capacity. The government says this huge undertaking will create thousands of jobs, transform the economy and better stitch the country together by bringing lower-cost power to places that have never had it.
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And with many of Canada’s big cities grappling with a post-COVID surge in people sleeping rough, one of the single largest line items in this budget is a major funding envelope for programs designed to end homelessness over the next decade.
Much of that money will be used to build new transitional and supportive housing, which pairs modest living quarters with health and mental care, to get people off the streets. There’s also $2 billion to build new infrastructure to help those grappling with substance abuse.
“This budget enables the kind of decisive action on homelessness that municipalities have long called for, and the federal government deserves credit for that leadership,” said Tim Tierney, the president of the Federation of Canadian Municipalities.
“The test now will be turning that commitment into safe homes and lasting support for people.”
