Canada's second federal budget to outline growth, affordability and defence spending

Prime Minister Mark Carney is set to deliver his second federal budget on Thursday, as the Liberal government outlines its next steps to support the economy amid an affordability crunch and ongoing trade tensions. Finance Minister François-Philippe Champagne said the budget will show how Canada aims to become "masters of our destiny" by investing in growth, businesses and sovereignty.

The Bank of Canada and the International Monetary Fund project roughly 2 % GDP growth for next year, while the OECD expects a slightly lower rate that still exceeds that of other G7 nations except the United States. Unemployment has fallen compared with a year ago, and foreign direct investment remains strong. A newly announced "productivity mega-deduction" will allow companies to write off investments in a tax-advantaged manner, and the budget may include details on the Canada Growth Fund, a Crown-controlled sovereign wealth fund that could offer individual investors a stake in major projects.

Affordability remains a priority. Recent Statistics Canada data show average hourly wages rose 2.3 % year-over-year, lagging behind a 3 % increase in consumer prices. Food-bank usage has reached record levels, and the government has limited temporary immigration to ease housing pressures, contributing to a 22 % decline in national average home prices since March 2022 and a nine-percent drop in rent from its May 2024 peak. The budget will set immigration targets for the next two years.

Opposition parties are pressing for additional relief. Conservative leader Pierre Poilievre called for further tax cuts on energy products, while New Democratic Party leader Avi Lewis advocated a wealth tax, government-run grocery stores and expanded health-care investment.

The finance ministry highlighted past measures such as last year’s income-tax cut, the removal of the consumer carbon tax and a temporary suspension of federal gas levies. Champagne emphasized the need to make life more affordable for Canadians.

On fiscal balance, the parliamentary budget officer expects the deficit to be about $63 billion this year, rising to $70 billion the following year, despite higher oil revenues. The government plans to separate day-to-day operational spending from capital infrastructure and aims to balance the operational budget by 2027-28. The budget will also detail plans to privatize portions of major airport operations, generating cash that could fund infrastructure projects or debt reduction.

Defence spending will be addressed in detail, with Canada having met the NATO target of 2 % of GDP and facing a future benchmark of 5 % by 2035. Carney pledged a full accounting of defence expenditures, and defence analyst Dave Perry noted the need for clearer information on equipment purchases and financing.