Canada's budget outlook and project progress under Prime Minister Mark Carney
A review of Prime Minister Mark Carney's upcoming budget shows mixed results on fiscal targets, trade negotiations, major projects and immigration policy.
Prime Minister Mark Carney is set to deliver his second budget next week, a year after announcing major infrastructure projects, new defence spending and a foreign-investment summit in Toronto. While the government claims it will balance the operating budget a year ahead of schedule, the Parliamentary Budget Officer warned that the definitions used for operating versus capital spending are unclear, allowing a traditional deficit and rising debt to persist. The PBO projects federal debt to reach $1.67 trillion by 2030-31, up from $1.3 trillion in 2025-26, and notes that interest costs are the fastest-growing expense.
Trade relations with the United States remain unsettled. The Canada-United States-Mexico Agreement has been in limbo since the Trump administration declined a 16-year extension, prompting annual reviews. Carney suspended talks in August after accusing the United States of last-minute measures that made the process “unfair” and “uneconomic,” though Canadian exports to the United States have risen compared with pre-Trump levels.
Investment commitments announced at the September summit include a $150 billion lending pledge from TD Bank, a $50 billion “Maple Fund” from Brookfield Asset Management and the Canada Pension Plan Investment Board, and a $70 billion pledge from the United Arab Emirates. Despite these announcements, the government has not yet reported substantial capital inflows, and investors say large deals take time to materialise.
On energy and the environment, the government backed the Pacific Link oil pipeline, a $100 million offshore wind project in Nova Scotia, and up to $1 billion for UN fees related to the Bay du Nord oil project. LNG Canada confirmed the second phase of its export facility, while a $1.2 billion ocean-protection package was announced. Critics, including some Indigenous groups and environmental organisations, have raised concerns about accelerated approval processes under the Building Canada Strong Act.
The Major Projects Office now employs about 200 staff and is reviewing 18 projects worth an estimated $194 billion, including the Pacific Link pipeline and the Roberts Bank Terminal 2. Legislation (Bill C-39) aims to speed approvals, but some unions and Indigenous representatives fear it could weaken consultation and environmental standards.
Immigration figures have fallen, with a recent law limiting asylum hearings to newcomers within a year of arrival and a plan to freeze permanent-resident admissions at 380,000 per year for three years. Immigration Minister Lena Metlege Diab announced changes to the Express Entry system to give extra points to high-wage foreign workers, aiming to address labour-market gaps.
Defence spending includes a selection of German firm TKMS as the preferred supplier for up to 12 submarines, an $11.3 billion ice-breaker program, and a new drone initiative targeting a tenfold increase in armed forces drone deployments, supported by a $50 million contract under the Defence Drone Initiative.
Interprovincial trade has seen progress with the Canadian Mutual Recognition Agreement, but barriers remain in services, occupational licensing and product standards. Public-service staffing is on track to meet reduction targets, with over 9,600 early-retirement applications approved under the Treasury Board’s incentive program.