Budget 2025 boosts investment incentives but experts question its impact on private sector growth
Canada’s 2025 federal budget marks a decisive shift in economic policy, placing long-term productivity and private investment at the forefront, even as fiscal constraints and trade frictions persist.
According to CPA Canada’s chief economist, David-Alexandre Brassard, “Growth is nowhere near where it could be due to trade frictions, but the fiscal reality is tight.”
He notes that the government is prioritizing targeted investments and tax measures, while phasing out several existing credits to simplify the tax system.
The budget introduces expanded SR&ED and critical minerals tax credits, and commits to accelerated capital deductions, while eliminating the underused housing tax, luxury tax on certain aircraft and vessels, and the Canadian entrepreneurial incentive.
John Oakey, CPA Canada’s vice-president of tax, observes, “There’s not a lot to unpack on the tax front in this long-awaited budget,” emphasizing that while productivity incentives were prioritized, many campaign promises remain unaddressed.
Fiscal discipline is a central theme.
Bloomberg said that the government forecasts a deficit of $78.3bn for the next fiscal year, with the debt-to-GDP ratio expected to rise before stabilizing.
Finance Minister François-Philippe Champagne asserts, “We will balance day-to-day operating spending with revenues by 2028-29, shifting the budget toward investments that grow the economy,” as reported by Bloomberg.
Still, the budget’s incremental approach has drawn mixed reactions from experts.
Theo Argitis, senior vice-president with the Business Council of Canada, describes the budget as moving “the needle in the right direction,” particularly in infrastructure and critical minerals, but questions whether it will have a major impact on private investment: “Will it have a major impact on private investment? I have my doubts”.
Al Jazeera reports that Robert Asselin, a former adviser to Liberal ministers, argues the government could have spent more to drive growth but acknowledges that doing so would likely have resulted in a much larger deficit.
The budget also reinforces trade diversification, competitiveness, and incentives for private investment, while increasing defence spending and maintaining a focus on housing.
However, as Brassard cautions, “the federal government has limited runway and deficits will rise before improving”.
While the removal of certain tax credits aligns with CPA Canada’s call for a simpler tax system, the organization expresses disappointment that Budget 2025 does not include a more comprehensive review.
