Budget 2026 is out: $142 billion in new measures, a $62.3-billion deficit — and no path to balance

Finance Minister François-Philippe Champagne tabled Budget 2026 in the House of Commons on Thursday, a 511-page document titled "Masters of Our Destiny" — "Maître Chez Nous" in French — that puts $142.1 billion in new tax incentives, spending and other measures on the table over five years.

The budget, the second of Prime Minister Mark Carney's government, projects a $62.3-billion deficit for the current fiscal year, about $3 billion below the $65.3 billion projected in the spring economic update, according to The Canadian Press. The deficit is projected to fall gradually to $52.9 billion by 2030-31 — but the document shows no path to a balanced budget, with deficits above $50 billion in each of the next four years.

The government says it will balance day-to-day operating spending with revenues by 2027-28, a year ahead of schedule. The Parliamentary Budget Officer has been skeptical of that pledge: its October outlook put the operating balance at a small $0.3-billion deficit in 2027-28, with a surplus only in 2028-29, and its officials have told MPs the government's fiscal anchors impose very little discipline.

What the money buys

The single biggest new measure is the productivity mega-deduction, previously announced and now in the budget at about $36.1 billion over five years. It lets businesses immediately write off the full cost of a broader range of capital assets, and the government says it will cut the marginal effective tax rate on new business investment to about 6.4 per cent from 13 per cent.

The budget also promises $400 billion in capital investment over six years and $22 billion in new affordability measures over five years, including help of up to $50,000 for first-time homebuyers. On the tax side, RBC Wealth Management reports the budget proposes a single May 15 deadline for filing personal tax returns and paying taxes owing, a new Canada Growth Incentive sheltering up to $15 million in capital gains on the sale of qualifying shares of an eligible Canadian company, and consultations on merging RRSP and RRIF rules into an "RRSP-for-life." The Canada Workers Benefit would be enhanced and renamed the Build Canada Workers Benefit, and the caregiver credit would become refundable.

Immigration is folded directly into the spending plan: 380,000 new permanent residents a year through 2028, with temporary residents — including international students and workers — reduced to 5 per cent of the population.

The bill for the borrowing

The cost of servicing the debt is now one of the budget's largest lines. The government projects $60.2 billion in debt charges this year — about 10 cents of every tax dollar — more than the $57.4 billion in health transfers to the provinces. The government forecasts real GDP growth of 1 per cent this year, 1.7 per cent next year and 2 per cent by 2028, against a backdrop of 50 per cent U.S. tariffs on a range of Canadian goods and a war in Iran that has pushed up fuel prices.

The budget also details a further $9.4 billion in new spending announced between the spring economic update and the budget. The previously announced holiday on the federal excise tax on gasoline and diesel runs until the end of January.

The politics

With a majority in the House of Commons, the government is expected to pass the budget — the question is whether the opposition accepts the government's central bet: that investment, not austerity, is the way through a trade war. Conservative Leader Pierre Poilievre has demanded spending cuts and the suspension of diesel taxes, warning the government will miss its own fiscal anchor. The Parliamentary Budget Officer's fall forecast put the 2026-27 deficit at $63.3 billion, close to the budget's own $62.3 billion, but projected debt-to-GDP rising from 41.1 per cent to 42.6 per cent by the end of the decade.