A windfall, a deficit and no path to balance
Mark Carney has used stronger-than-expected oil revenues, helped along by the Iran War, to fund tens of billions of dollars in fresh commitments in his second budget as prime minister. The plan, titled Masters of Our Destiny, puts C$142bn of new spending over the next five years toward national sovereignty and the cost of living. Carney framed the document as the next stage of an effort to make the country more independent and more sovereign, saying it concentrates on growth, on people and on that sovereignty so Canadians can live as they choose.[S1][S2][S4]
The fiscal picture is far from balanced. Canada's deficit stands above C$50bn, or roughly $36bn, and the budget charts no course back to surplus. Even so, the government says Carney has held to the fiscal targets he set earlier. Growth is expected to be modest over the coming year, faster than every G7 economy except the United States, and unemployment, though it moves unevenly from month to month, is lower overall than a year ago.[S1]
Pressure on the prime minister has been building nonetheless. Inflation and unaffordable housing continue to squeeze households, and the opposition Conservatives argue he has devoted too much attention to trade missions abroad and too little to everyday concerns. Average hourly wages have lagged inflation, food bank use has reached record levels, and the typical home price has fallen about 22% in recent years, largely because of tighter immigration, yet remains out of reach for many in Toronto and Vancouver.[S1]
Homelessness, groceries and the affordability squeeze
The biggest single new allocation is C$11.2bn spread over four years to combat homelessness, covering supportive housing along with mental health and addictions care. According to the government, the goal is to eliminate homelessness within ten years. Last year Statistics Canada found that one in eight Canadian households had encountered homelessness at some point in their lives.[S1][S3][S5][S6]
Ottawa also intends to enlarge a grocery benefit for Canadians on low and modest incomes, a measure estimated to deliver C$2,570 to a family of four within a year. The proposals arrive as households report mounting strain: wages have not kept pace with prices, demand at food banks is at a record, and fuel costs have pushed up expenses from gasoline to groceries, a pattern seen around the world.[S1]
Immigration held flat as trade strategy shifts
After record population growth in 2023 driven largely by newcomers, Canada has sharply scaled back its targets, capping international students and temporary foreign workers that companies had relied on to fill labour gaps. The Carney government says it will hold permanent resident admissions at 380,000 a year through 2028 while gradually lowering temporary resident arrivals to 370,000. The new budget keeps those levels unchanged.[S1]
Carney has faced appeals from both directions. The Royal Bank of Canada warned in September that without immigration the country's population would halve by the turn of the century, while the Conservatives have urged even lower numbers. On trade, the budget continues an effort to reduce reliance on the US and to soften the impact of President Donald Trump's tariffs, adding support for sectors such as steel and forestry. Since March 2025, nearly C$44bn has been set aside for workers and businesses affected by those tariffs, and the budget concedes that diversification will take time given the depth of the economic relationship with the United States.[S1][S7]
Sovereignty through rockets, arts and a digital library
Sovereignty runs through the budget in less expected places. Canada is the only G7 member unable to launch its own rockets, and C$2.7bn is earmarked for space technology and launch infrastructure to change that. On culture, Carney promises a tax exemption on income earned from original and creative artistic works, plus C$32.2m over four years for a free national digital library that will open with at least 200 titles and expand later. The budget also touches on defence, following his earlier pledge to raise military spending toward Nato's target of 5% of annual GDP by 2035.[S1]
