Manufacturers urge tax reform as experts warn Carney’s budget could reshape Canada’s economic future.
A record-breaking federal deficit—described as a “gamble” by Desjardins deputy chief economist Randall Bartlett—is set to define Canada’s upcoming fall budget.
This deficit could reshape the country’s economic trajectory for years to come. The analysis was released by Desjardins ahead of the November 4 announcement, as reported by The Canadian Press.
Bartlett, in his review of federal finances, calls this year’s budget “unprecedented” for its scale outside of recession or pandemic conditions.
He projects a $74.5bn deficit for the current fiscal year—well above interim parliamentary budget officer Jason Jacques’ recent estimate and a dramatic increase from last year’s numbers.
As per Bartlett, the closest comparison to this scale of deficit is Canada’s debt crisis of the 1990s, though he notes Ottawa’s fiscal position is stronger today.
However, he warns that such spending, if not carefully managed, could push Canada toward unsustainable debt levels unless it delivers the promised economic growth.
Much of the new spending, according to Bartlett, is targeted at long-term investments in defence and infrastructure, rather than the temporary support typically seen during downturns.
The government, led by Prime Minister Mark Carney, argues that “generational” investment is needed to counter threats such as US tariffs and global trade disruptions, as stated by Finance Minister François-Philippe Champagne, according to The Canadian Press.
Yet, Bartlett and other analysts point out that Canada is not currently facing a recession, and the effectiveness of this spending remains to be seen.
The debate over fiscal prudence has intensified as the government moves to table the budget in the fall.
Jacques has raised concerns about the “unsustainable” pace of public spending, noting that the debt-to-GDP ratio is no longer on a declining path—a view echoed by Desjardins’ forecasts, as reported by The Canadian Press.
The Liberals have promised to balance the operating budget within three years and to use deficit spending solely for capital projects thereafter, but Bartlett and Jacques argue that Ottawa’s broad definition of capital spending limits its value as a fiscal anchor.
Meanwhile, business leaders are urging the government to adopt measures that would enhance Canada’s competitiveness.
According to Bloomberg, manufacturing executives are calling for tax incentives similar to those enacted in the US under Donald Trump, which included a permanent 21 percent corporate tax rate and accelerated depreciation for business investments.
Kip Eideberg of the Association of Equipment Manufacturers highlights the positive impact of these policies on US industry and encourages Ottawa to follow suit.
Jim Jarrell, CEO of Linamar Corp., expresses optimism that the upcoming budget will be “pro-business” and suggests expanding the strategic response fund to help industries adapt to US tariffs, as per Bloomberg.
Despite the divergent views, Bartlett acknowledges the complexity of the fiscal debate, stating, “Reasonable people can disagree,” as reported by The Canadian Press.
He believes Canada is at an inflection point: if the government’s strategy succeeds, debt could return to a sustainable path; if not, the country risks a burdensome debt load.
Bartlett also cautions against complacency regarding Canada’s global credit rating, noting that while Ottawa’s finances are “heading in the wrong direction,” Canada may still fare better than other G7 nations in relative terms.
