Finance Minister François-Philippe Champagne tabled Canada’s 2025 federal budget on Tuesday, outlining $280 billion in capital investments over five years alongside $60 billion in savings and new revenues as the country responds to trade disruptions and economic uncertainty.
The budget aims to shift government spending from operations to capital investments while maintaining social programs including child care, dental care and pharmacare. The government projects the measures will enable $1 trillion in total public and private investment over five years.
Public service reduction coming
The federal government plans to reduce the size of the public service, which Champagne said has grown faster than Canada’s population since 2019. The government committed to reducing staffing “with fairness and compassion” but provided no specific numbers or timeline.
The savings come through a Comprehensive Expenditure Review that will modernize government, improve efficiencies and reduce duplication with other levels of government. The Department of National Defence will divest aging equipment fleets and focus on modern technology while maximizing benefits for Canadian companies.
Skills training and worker support
Budget 2025 includes a $1 billion skills retraining program to benefit 50,000 workers affected by trade disruptions. The initiative targets employees in sectors hit by U.S. tariffs, including steel, aluminum, forestry, automotive and agriculture.
The budget expands union training programs, extends tax credits to personal support workers and enhances labour mobility. Champagne said the measures will create pathways for careers in construction, clean energy and advanced manufacturing.
“Canadian workers will drive Canada’s economic transformation with new skills and training, and they will seize the exciting, high-paying careers it will create,” Champagne said.
Immigration system changes
The government plans to reduce immigration levels to what it calls sustainable numbers. Champagne said the changes will “restore control, clarity, and consistency to the immigration system, while maintaining compassion in our choices and driving competitiveness in our economy.”
The budget includes a $1.7 billion International Talent Attraction Strategy to recruit skilled workers for research and innovation roles.
Border security and hiring
The government will hire 1,000 new border services officers and 1,000 new RCMP personnel. The budget also commits funding to tackle organized crime, gun violence and auto theft through law enforcement and justice reform investments.
Business support measures
A $5 billion Strategic Response Fund will help sectors affected by tariffs adapt, diversify and grow. Businesses can use the fund to design new products, retool plants or offset costs of accessing new markets.
A $1 billion liquidity relief package will help small and medium-sized businesses adapt to trade disruptions.
The budget introduces a Productivity Super-Deduction to encourage business investment in new machinery, equipment and technology. The government will also enhance tax incentives for research and development.
Buy Canadian policy
The government will implement a Buy Canadian Policy requiring government purchases prioritize Canadian suppliers. Champagne cited steel from Hamilton and Sault Ste. Marie, aluminum from Saguenay-Lac-Saint-Jean, Bécancour and Kitimat, and lumber from Thunder Bay, Prince George and La Tuque as examples.
Competition and cost reduction
The budget includes measures to enhance competition in the financial and telecommunications sectors to reduce consumer costs. The government cancelled the consumer carbon price, reducing gas prices by 18 cents per litre, and cut taxes for 22 million Canadians.
Fiscal framework changes
The government will introduce a Capital Budgeting Framework separating day-to-day spending from capital investments. The federal budget will move to fall presentation to align with construction season and support project delivery by provinces, municipalities and contractors.
The government aims to balance day-to-day operating spending with revenues by 2028-29 while maintaining a declining deficit-to-GDP ratio.
Defence and infrastructure spending
Budget 2025 commits $30 billion over five years to defence, meeting NATO’s two per cent of GDP commitment this year. The spending includes NORAD modernization and Arctic defence reinforcement.
Infrastructure investments total $115 billion over five years, including an Arctic Infrastructure Fund and a Build Communities Strong Fund for roads, recreation centres and hospitals in new neighbourhoods.
Economic context
The Canadian economy is forecast to grow just above one per cent in 2025. Canada has the lowest net debt-to-GDP ratio in the G7 at 13.3 per cent and is one of two G7 economies with a AAA credit rating.
Canadian exporters face an average U.S. tariff of 5.4 per cent, the lowest of any U.S. trading partner, with 85 per cent of trade remaining tariff-free.
Champagne said the budget’s investments aim to boost average wages by $3,000 annually and add $15 billion to federal revenues.
