The Liberal government of Prime Minister Mark Carney has unveiled $142.1 billion in new spending, tax incentives, and other measures in its latest federal budget.
The increased spending comes as Ottawa grapples with a slowing economy due to U.S. tariffs and a soft labour market.
As a result, Canada’s federal government is projecting a $62.3 billion budget deficit for the current fiscal year. However, that is $3 billion lower than projected earlier this year.
The budget document shows no path to balance the federal budget anytime soon, with deficits projected of over $50 billion in each of the next four fiscal years.
Much of the new spending from Ottawa comes in the form of tax incentives aimed at attracting investment and spurring economic growth.
The 2026 budget shows that Canada will spend more to service the federal debt each year at about $60.2 billion, or $0.10 for every tax dollar collected.
By 2030, $0.12 of every tax dollar collected will go toward servicing federal debt charges.
The most expensive new item in the budget is the previously announced $36 billion “productivity mega deduction” that aims to encourage business investment in Canada by allowing companies to write-off new capital investments like equipment and building construction.
Ottawa also plans to spend $4.6 billion more on a national grocery rebate and $11.2 billion over the next five years to put Canada on the path to end homelessness within a decade.
The Canadian economy slipped into a brief, shallow recession earlier this year before recovering. However, economic growth across the country remains fragile.
