Budget 2026: Liberals pin tax changes, billions in spending on ‘economic sovereignty’

The budget — titled “Masters of our Destiny” — is light on references to tariffs or trade aggression from United States. As the title suggests, the 511-page document is framed around “economic sovereignty” — giving Canada a solid foundation in a volatile world.

In an embargoed press conference before tabling the budget, Finance Minister François-Philippe Champagne told reporters Canada is in a better position than its global peers to weather that volatility and come out stronger on the other side.

“We’re going to create a more prosperous, more independent Canada. This is the essence of being a master of our destiny,” he said.

Despite the raft of new spending measures in the budget, the federal government continues to pitch its plan as fiscally sustainable.

The government expects to post a deficit of $62.3 billion in this fiscal year, some $3 billion lower than projections in April’s spring economic update. Higher federal revenues tied largely to a spike in global energy costs had been expected to improve Ottawa’s fiscal standing in the near-term.

When asked why Ottawa did not use its fiscal windfall to pay down the deficit further, Champagne said two-thirds of the measures in Budget 2026 are meant to boost the economy, while the remainder are about supporting Canadians struggling with the rising cost of living.

Ottawa is proposing another boost to the Canada Groceries and Essentials Benefit in the form of a one-time payment worth half the benefit’s annual value. It’s expected to land in early 2027.

“If we have the fiscal capacity to grow, we also need to be there to support Canadians,” Champagne said in his press conference.

The budget includes a reference to the tighter fiscal conditions constraining the United States and other peer countries. A steep path for borrowing south of the border is a major force driving up global bond yields, raising costs for governments with particularly heavy debt.

“Unlike what we are seeing in other advanced economies, Canadians — not the bond market — will determine our choices,” the budget reads.

Canada is more insulated from rising global bond yields than some other deeply indebted countries, said Desjardins’ deputy chief economist Randall Bartlett. But he warned the country is not immune to intensifying fiscal pressures.

The Liberals say they do expect to meet their dual fiscal anchors. The government is projecting a stable decline in the deficit as a share of the economy through to 2029-30 and expects to balance the operating budget by 2027-28, a year ahead of schedule.

Bartlett said he doesn’t put much stock in the federal government’s fiscal anchors. Ottawa’s definitions of what constitutes operational spending versus capital investments are arbitrary, he argues — a critique echoed by the parliamentary budget officer.

The Liberals have been able to paint a picture of fiscal sustainability despite hefty spending commitments by baking “ambitious” revenue projections into its outlook, Bartlett argued.

“Without these very generous forecasts and the generous assumptions underneath them, they would not be able to reach the deficit numbers that they have. They would have much larger deficits,” he said.

The federal government is expecting the trade war with the United States will weigh on growth at the end of this year and the start of the next, but its overall growth outlook has been broadly stable since the spring.

Based on surveys from private sector economists in September, the budget projects real gross domestic product growth of one per cent this year, 1.7 per cent next year and two per cent by 2028.

The Liberal government continues to present in the budget its previous fiscal anchor, the debt-to-GDP ratio, which most economists consider a key measure of a sustainable debt path.

The government sees this metric rising but holding broadly stable over the next five years and declining over the longer term — even under a stress-test scenario that sees Canada face sharper economic disruption.

Bartlett said Desjardins also sees debt-to-GDP remaining broadly in check over the long term and, as a result, Canada is likely not at risk of an imminent downgrade to its sovereign credit rating.

The federal Conservatives are likely to attack the government’s deficit track during debate over the coming weeks. Conservative Leader Pierre Poilievre was urging Prime Minister Mark Carney to rein in “out-of-control” spending ahead of the budget.

Unlike Carney’s first budget, which was tabled under a minority government, the Liberals now have a majority mandate and can get their agenda passed without the support of other parties.

A proposed $11.2 million to address homelessness across Canada is likely to be popular with the NDP, though the party’s leader Avi Lewis has been critical of planned tax breaks for big businesses.

Tax incentives for businesses in the budget are led by the previously announced productivity mega-deduction, which will cost an estimated $36 billion over five years.

The government anticipates this incentive — which allows businesses to write off the full cost of new machinery or equipment in year one — will add $22 billion to Canada’s GDP annually and create 80,000 jobs over 10 years.

Budget 2026 also introduces the Canada Growth Incentive for businesses, which includes a new tax exemption on up to $15 million in capital gains earned on successful eligible investments. Small businesses would also get an extended window to roll over taxes on capital gains when they’re invested in another small business.

This report by The Canadian Press was first published Nov. 5, 2026.

Craig Lord, The Canadian Press

by The Canadian Press

Budget 2026: Liberals pin tax changes, billions in spending on ‘economic sovereignty’

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