Canada’s 2025 Budget Unveiled: $78B Deficit, Major Cuts Ahead

UPDATE: Canada faces a staggering $78 billion deficit as Prime Minister Mark Carney unveils the Liberal government’s first budget for 2025-26. The comprehensive 406-page document promises both significant spending cuts and ambitious investments aimed at revitalizing the economy amid trade uncertainties.

The budget forecasts the deficit will decrease to $65 billion in the following fiscal year, ultimately aiming for $57 billion by 2029-30. This figure notably surpasses the $42 billion deficit projected by the previous Liberal government, raising concerns among opposition parties.

In a bid to rein in spending, the government plans to implement $141 billion in new expenditures over the next five years while offsetting costs through substantial cuts. Key to this strategy is a comprehensive expenditure review expected to save $13 billion annually by 2028-29, culminating in a total of $60 billion in savings.

As part of its austerity measures, the government intends to reduce its public service workforce by approximately 40,000 positions, bringing total federal employees down to 330,000 by 2028-29. This downsizing aims to divert more taxpayer dollars toward critical infrastructure and innovation projects, rather than routine operational expenses.

In an effort to stimulate economic growth, the budget introduces a “productivity super-deduction” tax measure to enhance Canada’s investment environment, making it more attractive than that of the U.S.. Notable tax incentives include quicker write-offs for capital investments and new provisions for the liquefied natural gas (LNG) sector.

The budget also emphasizes a push for infrastructure development, allocating $214 million over five years to expedite major projects, including a high-speed railway connecting Toronto to Quebec City. The government aims to start construction in just four years, a significant acceleration from previous timelines.

In a controversial move, Carney’s budget proposes drastic cuts to immigration, slashing temporary resident admission targets from 673,650 in 2025 to just 385,000 in 2026. The plan aims to alleviate pressures on housing and healthcare systems, but it has raised eyebrows among advocates for immigrants.

The budget also includes a hefty increase in defense spending, earmarking $81.8 billion over five years, with a commitment to meet NATO’s target of 2% of GDP by March 31 and 5% by 2035. This funding will be directed toward recruitment, retention, and modernization of the Canadian Armed Forces.

In a bid to simplify the tax system, the government is eliminating the underused housing tax and the luxury tax on high-end aircraft and boats, a move that has been met with mixed reactions across the political spectrum.

As the budget unfolds, it raises critical questions about its potential impact on everyday Canadians and the economy at large. Citizens are urged to stay informed as this developing story evolves.

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