Budget 2025 is the first budget of Prime Minister Mark Carney’s Liberal government, and the first federal budget since April 2024. Titled Building Canada Strong, it responds to mounting economic pressures for Canada—including tariffs, slowing growth, and fiscal constraints—with billions in new spending aimed at stabilizing key industries and supporting workers.

While Budget 2025 supports the government’s strategic direction toward greater economic autonomy and national self-sufficiency, it falls short of the sweeping generational transformation some had anticipated based on early signals, opting instead for targeted investments rather than broad economy-wide reform.

This bulletin outlines the key measures, priorities, and implications of Budget 2025.

Fiscal outlook

Budget 2025 outlines total capital investments of $311.5 billion on an accrual basis or $502.2 billion on a cash basis over the 2024–25 to 2029–30 period. Annual capital investment will also nearly double from $32.2 billion in 2024-25 to $59.6 billion in 2029-30.

This Budget reintroduces fiscal anchors after budgets from 2021 onwards moved away from such guardrails. Budget 2025 further reaffirms the government’s commitment Canada’s fiscal anchors by committing to balancing day-to-day operating spending with federal revenues by 2028–29 (excluding capital expenditures), while ensuring the deficit-to-GDP ratio continues to decline over the Budget’s time horizon.

Budget 2025 includes $141 billion in new spending, offset by $51 billion in planned cuts and savings. The deficit is projected at $78.3 billion for fiscal year 2025–26, which is higher than previous forecasts. Deficits are expected to decline gradually, reaching $56.6 billion by 2029–30. The federal debt is forecast to rise from $1.35 trillion in 2025–26 to $1.59 trillion by 2029–30, with the debt-to-GDP ratio stabilizing and projected to fall to 42.2% by 2029–30.

Operating cost reductions

Budget 2025 introduces major spending cuts through a Comprehensive Expenditure Review (CER), aiming to reduce government operating costs and redirect funds toward strategic investments. The CER is expected to save $13 billion annually by 2028–29, totaling $60 billion over five years.

The review targets three main areas: modernizing government operations, streamlining program delivery, and recalibrating existing programs. Modernizing operations is projected to save $7 billion annually by 2028–29, while recalibrating programs will contribute another $5.4 billion in yearly savings.

Several departments and agencies will see reductions:

  • Innovation, Science and Economic Development Canada (ISED) will cut back on entrepreneurial and innovation programs, reduce specialized personnel, and limit external consulting.
  • The National Research Council (NRC) will restructure its research capabilities, including divesting from the Canadian Photonics Fabrication Centre. Statistics Canada will reduce the frequency of some data collection and rely more on statistical modeling.
  • Public Services and Procurement Canada (PSPC) will digitize procurement processes, reduce travel and professional services, and adopt AI tools to streamline operations.
  • The Royal Canadian Mounted Police (RCMP) will modernize its operations, with projected ongoing savings of $697 million. This includes reducing contracted services and administrative overhead.

Additional measures include workforce renewal through an Early Retirement Incentive Program, the creation of an Office of Digital Transformation to scale AI across government, and legislative changes to eliminate outdated reporting requirements.

Increasing government efficiency

The Budget introduces a new approach to budgeting that prioritizes capital investment over operational spending, aiming to balance day-to-day expenditures with revenues by 2028–29 and to maintain a declining deficit-to-GDP ratio. This shift is supported by a Capital Budgeting Framework that distinguishes long-term investments from operational costs.

A key component of this transformation is the Comprehensive Expenditure Review, which is expected to deliver $60 billion in savings over five years by consolidating internal services and streamlining programs within the federal public service. The government will also implement a Workforce Renewal Strategy, including an Early Retirement Incentive Program, to align the size of the public service with population growth and reduce long-term costs. Public sector pension legislation will be amended to restore a two per cent benefit rate for federal pension plans, including those for the Canadian Forces and the RCMP.

The government is investing in technology and innovation to improve public sector productivity. A new Office of Digital Transformation will lead the adoption of AI across departments and the Build Canada Exchange will replace the Interchange Canada program, aiming to bring 50 external leaders from technology, finance, and science into the public service to bring in private sector expertise and drive innovation.

Service modernization is another priority, with targeted investments to improve access and efficiency. The Budget proposes legislative amendments to the Canada Student Financial Assistance Program to limit grants to students attending public or not-for-profit institutions, resulting in projected savings of $1 billion over four years.

Budget 2025 also proposes a comprehensive review of federal fines and penalties to ensure they remain effective deterrents and are not simply absorbed as a cost of doing business. The review would assess whether current charges are sufficient to promote compliance and will aim to modernize outdated enforcement mechanisms. The results of this review are expected to be presented in Budget 2026.

Additionally, the Budget includes targeted amendments to streamline low-risk internal government processes and eliminate burdensome reporting requirements. These changes are part of a broader effort to reduce regulatory red tape and improve operational efficiency across departments. The goal is to free up public service capacity and ensure that enforcement and compliance tools are aligned with modern standards and policy priorities.

The Budget introduces reforms to the tax system to enhance fairness and efficiency. These include amendments to the Income Tax Act to close loopholes and limit abusive practices, including around loans to controlled foreign affiliates and guarantees involving non-resident entities. The government also proposes to advance Indigenous tax jurisdiction frameworks, supporting self-determination and economic development in Indigenous communities.

Building the Canadian economy

Budget 2025 outlines the government’s plan to build the economy through investments in infrastructure, productivity, innovation, and competitiveness, with the aim of increasing private investment in Canada.

To stimulate business investment and productivity, the Budget introduces a Productivity Super-Deduction, allowing companies to immediately expense capital investments such as machinery, clean energy equipment, and research assets. This measure is intended to make Canada’s tax environment more competitive and encourage growth in high-productivity sectors. The Scientific Research and Experimental Development (SR&ED) tax credit is also enhanced, with streamlined administration and increased expenditure limits from the previously announced $4.5 million to $6 million to support innovation.

The Budget supports high-growth companies through a new Venture and Growth Capital Catalyst Initiative, allocating $1 billion to emerging fund managers and scaling firms. An additional $750 million is earmarked to address early-stage funding gaps.

Immigration policy reforms are proposed to stabilize permanent resident admissions and reduce temporary resident targets. The government proposed to invest $1.7 billion to recruit top international researchers and strengthen Canada’s research ecosystem.

Significant investments are planned for airports and ports to improve safety, efficiency, and trade capacity. The Build Communities Strong Fund would deliver $51 billion over 10 years to support housing-enabling infrastructure, health facilities, and regional development. The Climate Competitiveness Strategy is a central pillar of the industrial strategy, strengthening carbon pricing, streamlining regulations, and expanding clean economy tax credits. Investments in clean electricity, hydrogen, and carbon capture aim to position Canada as a global leader in low-carbon technologies.

To support the clean energy transition, the Budget creates a Critical Minerals Sovereign Fund and a First and Last Mile Fund to accelerate development of strategic mineral projects. These initiatives aim to enhance supply chain resilience and support Canada’s net-zero goals.

With respect to AI, Budget 2025 includes $925.6 million of investment over five years to build a sovereign AI compute infrastructure to support domestic research and innovation. The Canada Infrastructure Bank will be enabled to fund AI-related projects, and a new national AI strategy is expected by year-end.

The Budget also introduces measures to increase competition in telecom and financial services, including streamlining infrastructure deployment, regulating fiat-backed stablecoins, and restricting non-compete agreements in federally regulated sectors.

Strategic industries

Budget 2025 outlines a set of measures to support sectors most affected by global trade disruptions, particularly U.S. tariffs. Ottawa’s proposed investment of over $12 billion over five years to help industries such as agriculture, forestry, steel, aluminum, and manufacturing adapt to new economic realities and build resilience.

Support for agriculture, fish, and seafood includes enhancements to the AgriStability program, increased funding for market diversification, and expanded access to interest-free loans through the Advance Payments Program. A new biofuels production incentive is also introduced to stabilize domestic producers. These measures aim to help producers manage rising costs and access new markets.

Loan guarantees and expanded program funding are proposed for the forestry sector, to support product diversification and export initiatives. Federal procurement policies would also be adjusted to prioritize Canadian lumber, helping to sustain domestic demand and support industry transformation.

The Strategic Response Fund is proposed to provide $5 billion in flexible support, while regional development agencies would receive $1 billion for tariff response initiatives. Additional funding would support workforce reskilling, enhanced Employment Insurance benefits, and new digital tools to connect workers with jobs.

Liquidity support includes a $10 billion Large Enterprise Tariff Loan facility and enhancements to the Business Development Bank’s Pivot to Grow program. Tax deferrals for corporate income and GST/HST payments would provide up to $40 billion in short-term relief for Canadian businesses.

Trade

The Budget introduces a new Trade Diversification Corridors Fund, allocating $5 billion over seven years to Transport Canada. This fund would invest in infrastructure projects, such as ports, railways, and digital systems, to improve access to overseas markets and strengthen supply chains, with a goal to double Canada’s non-U.S. exports over the next decade, generating an additional $300 billion in trade.

To support northern sovereignty and economic development, the Budget proposes a $1 billion Arctic Infrastructure Fund for dual-use transportation projects in the North. These investments would serve both civilian and military needs and promote Indigenous economic reconciliation. Additional funding is allocated to accelerate regulatory processes in Canada’s North, ensuring timely project delivery.

Export Development Canada (EDC) is tasked with increasing its total business facilitated by $25 billion by 2030, focusing on strategic sectors such as critical minerals, energy, clean technology, infrastructure, and defence. The Budget introduces a $2 billion concessional trade finance envelope to help international partners purchase Canadian goods and services, especially in developing economies and in Ukraine’s reconstruction.

The Budget also proposes expanding Canada’s trade presence in Europe and the Indo-Pacific by allocating $8 million to Global Affairs Canada (GAC) for trade missions and support to Canadian Chambers of Commerce in Europe. Additionally, $20 million is proposed to enhance Canada’s capacity to negotiate and implement trade and investment agreements.

Small and medium-sized enterprises (SMEs) would receive targeted support through the expansion of the CanExport program, the Innovation Partnership Program, and the Canadian Technology Accelerator. A new SME Export Readiness Initiative would provide $46.5 million for training and capacity-building to help SMEs enter international markets. The National Research Council’s Clean Technology Demonstration Initiative would also be expanded globally with $39.9 million in funding.

To modernize food export systems, the Canadian Food Inspection Agency (CFIA) would receive $76 million to digitize trade tools and services, including the use of AI and standardized export certificates. An additional $32.8 million would support efforts to secure and expand market access for Canadian agriculture, fish, and seafood sectors.

Cost reduction and social programs

The Budget sets out several initiatives aimed at improving affordability, expanding opportunity, and protecting social programs.

Among these is the launch of Build Canada Homes, a new federal agency that will drive investment and public-private cooperation to expand housing supply. The initiative aims to double the pace of homebuilding to between 430,000 and 480,000 homes annually, with $25 billion allocated over five years. The program will leverage federal funds to attract private capital and promote advanced construction methods that reduce costs and emissions while accelerating timelines.

The Budget makes the National School Food Program permanent. It also introduces Automatic Federal Benefits, a system designed to ensure that up to 5.5 million low-income Canadians receive benefits without needing to apply.

Additionally, the Budget invests in workforce development and employment. This includes a new reskilling package for up to 50,000 workers, enhanced Employment Insurance flexibility and benefits, and a digital jobs and training platform to connect Canadians with career opportunities. Youth employment is supported through 175,000 placements in programs such as Canada Summer Jobs, the Youth Employment and Skills Strategy, and the Student Work Placement Program.

Cultural and community initiatives receive funding under the Budget as well. The Budget supports Canadian creators through investments in the Canada Music Fund, Telefilm, Canada Media Fund, and the National Film Board, among others. It also introduces amendments to the Copyright Act to establish an artist’s resale right, benefiting visual artists, particularly Indigenous creators. Funding is provided to CBC/Radio-Canada to strengthen its public broadcasting mandate, and support is extended to festivals and community celebrations to foster cultural participation and national identity.

Defence and national security

Budget 2025 includes sweeping investments and reforms aimed at strengthening national defence, border security, law enforcement, and community safety. Defence spending is set to rise to $81 billion over five years.

The Budget proposes a significant pay increase and expanded health supports for military personnel. Through Budget 2025, the government commits that Canada will meet NATO’s 2% defence spending target in 2025 and will work toward the 5% Defence Investment Pledge by 2035. To support this, it will create a new Defence Investment Agency and advance a Defence Industrial Strategy to rebuild domestic production capacity and strengthen supply chains.

The Budget allocates $1.7 billion over four years to hire additional RCMP personnel and expand federal law enforcement capacity. This includes the creation of a new Financial Crimes Agency to combat money laundering, organized crime, and online financial fraud. The agency would bring together police and civilian expertise to investigate complex financial crimes and recover illicit proceeds, with legislation to establish it expected in spring 2026.

Border security is also a major focus, with $617.7 million over five years for the Canada Border Services Agency (CBSA) to enhance its ability to detect illicit goods and enforce trade measures. The CBSA would hire up to 1,000 new officers and receive increased recruit stipends under the plan. Additionally, the Budget proposes $216.8 million to extend early retirement benefits to frontline CBSA officers.

Community safety is addressed through reforms to the Canada Community Security Program, aimed at combatting hate crimes and protecting places of worship, schools, and community centres.

The government also plans to modernize the Meteorological Service of Canada and strengthen emergency management, including aerial firefighting capacity.

Opposition reaction

The Liberal government holds a minority in the House of Commons, meaning it does not have enough caucus members to pass legislation through the House of Commons on its own. With budget votes treated as matters of confidence, failure to secure support from at least one opposition party could trigger a federal election. As a result, the Liberals must negotiate with other parties to ensure the Budget’s passage and maintain their hold on government, either through opposition votes in favour of the Budget, or abstentions from opposition MPs.

Significantly, Nova Scotia MP Chris D’Entremont crossed the floor to join the Liberal caucus on the evening the Budget was tabled, meaning the Liberals require only two opposition votes to pass the Budget.

Conservative Party of Canada

In the wake of the Budget being tabled in the House of Commons, the Conservatives stated they cannot support it. Conservative House Leader Andrew Scheer delivered a critical response, calling Budget 2025 reckless and unsustainable. He condemned the projected deficit as excessive and warned it would saddle Canadians with higher taxes and interest payments.

Mr. Scheer further argued the Budget fails to address rising cost of living and claimed that excessive regulation and red tape are stifling investment.

NDP

Interim NDP Leader Don Davies would not commit to supporting or opposing the Budget immediately after it was tabled. Mr. Davies offered a cautious but critical response to Budget 2025, acknowledging positive investments in infrastructure, clean energy, and co-operative housing, while expressing deep concern over public sector cuts and regressive tax and climate policies. He emphasized that the NDP would take a “wait-and-see” approach, consulting stakeholders and working Canadians before deciding whether to support the Budget.

The NDP expressed openness to post-Budget negotiations to seek concessions from the Liberal government in exchange for support or abstention from the NDP caucus.

Bloc Québécois

Bloc Québécois Leader Yves-Francois Blanchet was clear that the Bloc Québécois could not support the Budget, as it failed to respond to any of the demands that the Bloc caucus had placed before Prime Minister Carney during pre-budget consultations.

Green Party

Green Party Leader Elizabeth May stated that she would not support the Budget, condemning the government’s call for public sacrifices while funding what she views as speculative and environmentally costly initiatives. She added, however, that she would be willing to negotiate with the Liberal government to determine whether she could support the Budget in exchange for adjustments to measures of concern.

What next?

Starting  Budget 2025, the Government is shifting to a fall budget cycle, with the next full budget planned for Fall 2026 and the Spring Economic Update replacing the former Fall Economic Statement.

With Budget 2025 now tabled, the government’s immediate priority is securing its passage in the House of Commons. The size and scope of the Budget, which includes considerable new spending across a nearly 500-page document, will require extensive parliamentary debate and lengthy legislative implementation measures.

Beyond Parliament, the government faces mounting external pressures, including ongoing trade tensions, economic downturn, weakening consumer confidence, and upcoming negotiations that will determine the future of the Canada-United States-Mexico Agreement (CUSMA).

These challenges underscore the importance of fiscal and political stability as Canada navigates a period of economic uncertainty marked by rising unemployment, weak productivity, the changes resulting from the implementation of AI, and slowing growth. The success of Budget 2025 will depend not only on its passage, but also on the government’s ability to deliver on its promises—with the support of a reduced but hopefully effective public service—while managing anticipated and unknown headwinds.