Federal Budget 2025
Prime Minister Carney is Looking for Dance Partners
Yesterday, nearly 200 days since the Liberal election victory, and a year and a half since the last federal budget, Prime Minister Mark Carney’s government delivered its first budget.
In a budget that promised to “spend less and invest more,” Carney and Finance Minister François-Philippe Champagne have paired fiscal restraint with targeted investment. The budget seeks to balance the operating expenditures of the federal government within three years while directing new capital spending to projects that grow the economy and improve Canada’s competitiveness.
Gone are lofty Trudeau-era climate ambitions in favour of a new pragmatic strategy that ties emissions policy directly to national competitiveness. Under Carney, being symbolically green is less important than being economically competitive. The budget quietly steps back from an oil-sands emissions cap - a political fault line between Ottawa and Alberta - and instead leans on industrial carbon pricing, strengthened carbon markets, and tougher methane rules to reduce emissions. It’s the clearest sign yet that Ottawa wants a truce, not yet another political fight with Alberta.
Carney is now looking for dance partners to avoid a political fight in parliament over his budget. He found one such dance partner last night when Nova Scotia MP Chris d’Entremont announced he was crossing the floor from the Conservatives to the Liberals. With d’Entremont now in the Liberal fold, Carney’s magic number to pass the budget is down to two.
d’Entremont’s decision has insiders speculating whether his departure could inspire other Conservative MPs who are frustrated with their party leadership to leave caucus or join the Liberals. Some Liberal MPs have publicly speculated that there are more dance partners for Carney to find amongst Conservative MPs.
What follows is a rundown of the key takeaways.
Spending Smart(ish)
The budget reaffirmed the government’s plan to restore fiscal balance over the medium term while protecting investments that support long-term growth. The deficit for FY2025-26 was projected at $78 billion, with operational spending accounting for roughly half of that figure. In total, Budget 2025 makes approx. $1 trillion in total investments over the next five years. Budget 2025 is rooted in two fiscal anchors:
Balancing operational spending with revenues by 2028-29, and
Maintaining a declining deficit-to-GDP ratio.
To meet its spending reduction commitments, Budget 2025 advances $60 billion in savings over five years following the Comprehensive Expenditure Review. Savings are to be achieved by restructuring operations and consolidating internal services, including workforce adjustments and attrition, to restore the public service to sustainable levels.
Greener Goals Have Real-World Realities Now
Budget 2025 signalled a decisive shift toward balance in federal climate policy and introduced the new Climate Competitiveness Strategy to reduce Canada’s carbon-emissions intensity while allowing conventional energy projects to continue. This includes a plan to potentially abandon the oil & gas emissions cap, make carbon markets stronger and more effective, strengthen methane regulations, and provide additional supports for CCUS deployments.
The Climate Competitiveness Strategy entails:
Strengthening industrial carbon pricing,
Clarifying the Greenhouse Gas Regulations,
Enhancing clean economy investment tax credits,
Supporting critical mineral projects, and
Mobilizing capital for the transition to net-zero.
Budget 2025 also reaffirms its commitment to large-scale clean energy deployment — including low-carbon fuels, nuclear, hydrogen, and grid modernization — as central pillars of Canada’s energy transition.
Major Projects, Housings & Infrastructure Get Concrete Policy
A key pillar of the government’s economic plan was to establish the Major Projects Office (MPO) and the structure for One Canadian Economy.
Budget 2025 provides $213.8 million to launch the MPO and support the Indigenous Advisory Council. It also provides funding to advance meaningful participation of Indigenous rightsholders in consultation processes to avoid legal issues as projects advance through accelerated approvals processes.
On housing, Budget 2025 launched Build Canada Homes, a new agency that will deploy capital, create demand, and harness technology to build affordable homes at scale. It’s three pillars are to partner with industry, other orders of government, and Indigenous communities to build affordable housing; deploy capital; and adopt the government’s new Buy Canadian Policy.
On infrastructure, Budget 2025’s signature investment is $51 billion of new and repurposed funding over ten years to launch the new Build Communities Strong Fund. The fund will support a wide range of projects, including housing-enabling infrastructure, health infrastructure (from hospitals to medical schools), and community infrastructure.
Budget 2025 initiatives include:
$51 billion over ten years to support local infrastructure projects,
$13 billion to establish the Build Canada Homes agency,
$2 billion to support the construction of the Darlington nuclear project,
$110 billion over five years to enhance productivity and competitiveness,
Eliminating GST on first-time homebuyers for new homes under $1 million, and
$213.8 million to launch the MPO.
A New Defence Strategy: Now with 5% More GDP
Budget 2025 confirms Canada’s previous commitment to increase defence spending to 5% of GDP by 2035.
This includes an initial investment of $6.6 billion to support the Defence Industrial Strategy (DIS) and $30.8 million to launch the Defence Investment Agency (DIA). The DIS is intended to improve access to capital, drive research and innovation, bolster domestic supply chains, and grow critical resource stockpiles.
The government says it will release the DIA in the coming months and will advance three main objectives: consolidating procurement processes, targeting procurements to strategic defence sectors, and ensuring earlier engagement between the Canadian Armed Forces (CAF) and the defence industry.
Key initiatives from Budget 2025 include:
$81.8 billion over five years to rebuild, rearm, and reinvest in the CAF, including $9 billion to be spent by the end of FY2025, and
$1.3 billion to implement a new border protection plan, including hiring 1,000 new Canada Border Service Agency officers.
Canada’s AI Ambition - Now Recruiting
Prime Minister Mark Carney has emphasized technology and competitiveness as central pillars of Canada’s economic strategy. Budget 2025 prioritizes investments to develop large-scale sovereign AI infrastructure that boosts AI compute availability in Canada.
Budget 2025 also advances significant investments to launch an International Talent Attraction Strategy and Action Plan to recruit over a thousand highly qualified international researchers. Budget 2025 did not include the promised refresh of Canada’s AI strategy, which Minister Evan Solomon is anticipated to table by the end of the calendar year.
Key initiatives include:
$1 billion to recruit exceptional international researchers to Canadian universities in an accelerated fashion,
$400 million to ensure the recruited chairs have the equipment they need to conduct research in Canada,
$133.6 million to help relocate top international doctoral students and post-doctoral fellows to Canada,
$120 million to support the recruitment of professors, and
$925.6 million to support large-scale sovereign public AI infrastructure.
Work(ers) in Progress
Budget 2025 addresses workforce pressures and demographic imbalances by stabilizing immigration flows and expanding domestic skills training and credential recognition. The government confirmed lower intake targets for temporary residents and international students, alongside targeted supports for housing and community integration to help align population growth with labour market needs. To ensure that Canada addresses its labour needs, Budget 2025 launched the Foreign Credential Recognition Action Fund.
The 2026-28 Immigration Levels Plan, released as part of Budget 2025 sets the permanent resident admission targets at 380,000 per year for three years, while the target for temporary resident admissions is greatly reduced from 673,650 in 2025, to 385,000 in 2026, and 370,000 in 2027 and 2028.
Budget 2025 initiatives include:
$5 billion to support the Strategic Response Fund,
$77 million to address trucking industry non-compliance,
$97 million to launch the Foreign Credential Recognition Action Fund,
$75 million to boost an apprenticeship training program focused on the building trades,
$3.6 billion for temporary EI measures,
$450 million to support workers’ reskilling, and
$382.9 million over five years and $56.1 million ongoing to launch new Workforce Alliances between employers, unions, and industry groups.
Keeping it Kind (and Kinda Tax Friendly)
Budget 2025 protects several Trudeau-era social programs, including by maintaining the Canada Child Benefit, National School Food Program, Canada Disability Benefit, and Canadian Dental Care Plan. Budget 2025 also begins the process to launch Automatic Federal Benefits to help connect up to 5.5 million low-income Canadians to their benefit entitlements.
Budget 2025 initiatives include:
A middle-class income tax cut saving two-income families up to $840 per year,
A temporary five-year tax credit of up to $1,100 per year for personal support workers,
$660.5 million over five years $132.1 million per year ongoing to support the Department for Women and Gender Equality,
$216 million per year ongoing to make the National School Food Program permanent, and
$594.7 million to support the Canada Summer Jobs program.
Dance Floor Politics
For all its size and scope, Budget 2025 didn’t exactly set stakeholder hearts racing. The rollout drew more polite applause than excitement, as most observers waited to see how the numbers stack up in practice.
Conservative Leader Pierre Poilievre dismissed the 2025 federal budget as “costly” and said his party will propose an amendment aimed at “making Canada affordable again.”
The Canadian Chamber of Commerce said Budget 2025 takes some welcome steps toward balancing fiscal restraint and investment, but warned that Canada’s sluggish growth, investor uncertainty, and weak competitiveness will only improve if the government follows through and restores confidence and attracts real private-sector investment.
The Alberta Government’s response to the federal budget was polite but pointed. Finance Minister Nate Horner said the province appreciated the hints of flexibility on the federal emissions cap but noted that “signals” aren’t enough - Ottawa needs to show real details. Premier Danielle Smith echoed that sentiment, saying her government remains in talks with Ottawa to roll back policies she says have hurt Alberta’s energy sector.
On the flip side, Manitoba Premier Wab Kinew applauded the federal focus on the Port of Churchill, calling it a positive sign that Ottawa remains committed to investing in northern trade and infrastructure. The Canadian Taxpayers Federation expressed concern about increased spending and debt saying, “Canadians don’t need another plan to create a plan to meet about cutting spending, Canadians need real spending cuts now.”
The Canadian Union of Public Employees (CUPE) blasted Budget 2025 as austerity that protects corporations while squeezing workers and public services, urging Ottawa to “go back to the drawing board” and invest in people instead.
We’re here to help you make sense of Budget 2025 and explore how your organization can thrive in this evolving landscape. Let’s connect.
