OTTAWA
Prime Minister Mark Carney's second federal budget allocates tens of billions of dollars in new spending to tackle what the government describes as the twin challenges of improving affordability and securing Canada's sovereignty.
The budget's new big-ticket items include generous tax measures designed to prompt an "investment supercycle," increased GST rebates to help with the cost of living, an $11.2-billion cash injection to tackle homelessness and one of the largest investments in Canadian arts, culture and identity in recent history.
"The moment is serious. Canadians know it. Our new government knows it. The moment demands an ambitious plan to be masters of our destiny," Finance Minister François-Philippe Champagne said, alluding to U.S. President Donald Trump's trade war that has tested the country's economic resilience.
"It's the next big step in our action plan to make this country more independent, more sovereign, masters of our destiny so we can live our lives as we wish," Carney added.
Buoyed by a spike in oil prices that delivered a financial windfall for Ottawa, the budget calls for about $142 billion more in spending over the next five years than was originally planned in the spring economic update.
All of that is more than offset by increased revenue, about $158.3 billion more over the next half-decade, from the oil and gas boom and an economy performing better than expected.
However, Ottawa is still projecting deficits for the foreseeable future: $62.3 billion for the 2026-27 fiscal year, declining only slightly in the following years.
The government's preferred fiscal anchor, the deficit-to-GDP ratio, is on a downward trajectory because the economy is expected to grow faster than spending in the years to come.
Still, the budget reveals that the combination of increased spending and higher interest rates will spike public debt charges.
The cost to finance Canada's roughly $1.3-trillion national debt will jump from $60.2 billion in 2026-27 to $85.5 billion in 2030-31, exceeding what the government spends on some crucial programs like the Canada Health Transfer and equalization.
While that is much higher than in the recent past, Sahir Khan, the executive vice-president at the Institute of Fiscal Studies and Democracy, said the government's "fiscal sustainability is intact."
"Many of the government's new initiatives are measured, means-tested, timely and targeted," Khan said in an interview.
Canada's sterling AAA credit rating, relatively strong GDP growth and healthy balance sheet mean that, "compared to everybody else, we're looking really shiny," he said.
Conservative Leader Pierre Poilievre, meanwhile, blasted the budget as too expensive and ineffective.
"This prime minister will inflate the cost of fuel, food and homes. This is a costly credit card budget that Canadians can't afford and Conservatives will vote 'no,'" Poilievre said.
"This is the single biggest borrowing binge in Canadian history," he said.
To address criticism that it hasn't done enough to help shoulder that burden, this budget offers a one-time 50 per cent top-up to the GST rebate which has been rebranded as the groceries and essentials benefit, delivering up to $2,570 in cash payments this year to an eligible family of four, according to government estimates.
About 12 million people qualify for these payments.
Ottawa is also dropping the threshold so many more low-income families can qualify for the renamed Build Canada Workers Benefit to help them make ends meet while wage growth continues to lag inflation.
There's also a more generous caregivers' benefit to help people looking after loved ones and a big boost to the Nutrition North program to offset food costs in remote areas, among other measures in a $22-billion plan designed to alleviate cost pressures.
NDP Leader Avi Lewis said Ottawa's budget doesn't go far enough to help people in need.
"The masters of our destiny in Budget 2026 is not you and your family, it’s members of the billionaire class that the prime minister invited to his investment summit," Lewis said.
Business tax deduction
As Trump unleashes an economic assault on the Canadian economy through punishing tariffs on key industrial products, the government is allocating billions for a "productivity mega-deduction" to jumpstart investment.
That deduction allows businesses of all sizes to immediately write off investments like building new plants, purchasing equipment or software and laying railway tracks or pipelines, among thousands of other possible actions.
The government says this huge federal expense, it's set to cost a stunning $36 billion over five years, makes the Canadian business tax regime the most competitive in the developed world.
This measure alone is expected to boost GDP growth by about 0.5 per cent, which is significant considering the overall growth rate next year is forecast to be about two per cent.
Ottawa also revealed new details about its Canada Strong Fund, a new Crown-controlled sovereign wealth fund that will initially deploy about $25 billion to take ownership stakes in some major projects and businesses.
Individual Canadians will have a chance to share in the fund's potential success by purchasing "Canada Strong Notes," savings bond-like products that will allow people to invest a certain amount, collect yearly interest income and then make potentially more money if the underlying investments perform well.
The budget's focus on economic sovereignty follows a U.S. midterm election where the trade war with Canada shaped key races, helping Democrats flip the Senate.
This story was written by the e2gold.ca newsroom from reporting by The Globe and Mail, CBC News and Yahoo News. Quotes are checked word for word against that reporting.