Lower-than-expected deficit, affordability measures take centre stage in Ottawa's spring fiscal update
The Liberal government’s spring fiscal update highlighted several new measures aimed at tackling affordability challenges across the country, as well as a deficit that is projected to be $11.5 billion lower than was anticipated in Budget 2025 .
Tuesday’s update now projects a $66.9-billion deficit for the 2025-2026 fiscal year, lower than the $78.3-billion deficit that was projected in the fall budget last November. The government also projected that deficits would stay below that level for the next two fiscal years, with a deficit projection of $65.3 billion in 2026-2027 and $63.1 billion in 2027-2028.
Finance Minister François-Philippe Champagne said the lower deficit is due to a resilient economy that has been stronger than expected. Canada’s real GDP grew by 1.7 per cent in 2025 and the country avoided a recession, he said, even as tariff increases and trade tensions put pressures on economic activity.
“We’ve been fiscally prudent, and that is what I think is in the mind of Canadians,” Champagne said during a news conference before he tabled the update.
Kevin Page, chief executive of the Institute of Fiscal Studies and Democracy at the University of Ottawa, said the lower-than-anticipated deficit is a good thing.
“I think some of the movement in those headline fiscal numbers is good. The government found itself with some additional revenue, and because the deficit came out a little bit lower, they chose to spend it on initiatives. They thought they needed to provide additional supports for people,” he said.
But Page disagreed with the government’s assertion that the economy is strong.
Real GDP grew below the pace of the previous two years — two per cent growth in 2023 and 2024.
“I don’t think the economy is strong. I think the economy is weak. The economy came pretty much as expected in the November budget in terms of overall real GDP growth,” Page said.
Tuesday’s fiscal update also comes as geopolitical uncertainty continues to put downward pressure on the Canadian economy, contributing to volatility and uncertainty, as well as higher consumer prices.
Canada’s Consumer Price Index also increased by 2.4 per cent year-over-year in March, largely driven by a surge in gasoline prices due to the conflict in the Middle East that resulted in the closure of the Strait of Hormuz. Data from Statistics Canada suggests that prices surged 21.2 per cent from February to March, the largest price increase on record. Prices of food purchased from grocery stores also rose by 4.4 per cent year-over-year in March, after increasing by 4.1 per cent in February.
While shelter inflation slowed in March with a 1.7 per cent increase, rent inflation was just above four per cent during the same time period.
“We know that affordability is top of mind for Canadians, and we are happy to do our part,” Champagne said.
To that end, the government announced several new economic measures to tackle affordability concerns, while reiterating previously announced measures including the Canada Groceries and Essentials Benefit and a freeze on the fuel excise tax.
The new items include legislation that will reduce the base Canada Pension Plan contribution rate from 9.9 per cent to 9.5 per cent starting on Jan. 1, 2027 if passed. The government said this will translate into $133 in annual savings for employees earning $70,000 a year, with equivalent savings to their employer.
The government also plans to implement the Team Canada Strong program, which will invest $6 billion over five years to train and hire more young people into the skilled trades. Youth aged 15 to 30 can join the program, which will provide “paid, entry-level, trades-related work experience that leads into an apprenticeship,” according to the spring fiscal update.
Of that, $2 billion will be invested over that time period and $262 million afterwards to increase the number of young people into the skilled trades. Around $3.4 billion over the next five years will go toward establishing an Apprenticeship Training Grant that will provide apprentices with a weekly income top-up of $400 per week while they are finishing their programs, as well as a one-time $5,000 completion bonus and income supports after obtaining Red Seal certification. Up to $331 million over five years will be used to modernize training apprenticeship programs so youth can finish achieve Red Seal accreditation faster.
Though the update included some measures to address housing demand, Desjardins chief economist Jimmy Jean said there was little to improve the supply side of the equation.
“The Carney government ran last year on the promise of 500,000 new units built per year. We haven’t come even close to that last year. Part of the push was to build a significant number of non-market housing (units), and I feel like this part has been left out in this in this update,” Jean said.
“The speed at which this plan is advancing is a little bit of concern at this stage, because we know that the answer (needs to address) supply. They talk about demand-related measures they’ve put in place, like cutting the GST for first time borrowers, but the solution has to come from the supply side.”
Page also raised concerns over the lack of transparency on the new Sovereign Wealth Fund, which was announced by Prime Minister Mark Carney on Monday.
The spring fiscal update didn’t provide details on how it will source the $25 billion needed to seed the fund.
“There was a lot of interest in this new sovereign wealth fund that was effectively announced yesterday. I don’t think we got that much more in the way of details, and there’s a little bit of, I would say, lack of transparency on how you know that $25 billion is is going to be expensed or cashed out,” he said.
“There’s a table on financial requirements, but we can’t see it, and they don’t even highlight it. So it’s a bit bizarre from a transparency accounting perspective.”
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