2025 Federal Budget Highlights
The Financial Landscape
Today, François-Philippe Champagne tabled his government’s first Budget, Canada Strong (Federal 2025 Budget (PDF)).
Prime Minister Mark Carney promised a pro-growth budget that will usher Canada into a “new era” and “define our next century.” The Budget lays out the government’s plan to navigate through the economic and political uncertainties facing Canada by building a domestic economy that is made “by Canadians, for Canadians”. It also shows the cost of the Government’s vision will increase the deficit $78.3 billion this year.
One notable change is that the government is introducing a capital budgeting framework. This framework distinguishes day-to-day operational spending from long-term investments—changing the architecture of government fiscal planning.
As anticipated, the Budget also lays out the government’s plan to shrink the federal public service. The number of federal public service ballooned by 40% under the Trudeau government, far outpacing Canada’s population growth. The 2025 budget sets out a timeline to reduce numbers by about 10% or 40 0000 jobs by 2028/29. Senior officials are expected to be impact as well. The budget calls for the public service executive offices to shed 1,000 positions over two years, which includes 650 positions already eliminated under the Comprehensive Expenditure Review.
The Budget also included more details of the government’s Buy Canadian Policy, including:
When domestic suppliers are not available, purchases will be required to include Canadian content or be sourced from trusted partners.
Such cases will require ministerial approval.
To facilitate the implementation of the Buy Canadian Policy, the government will also implement regulatory amendments to ensure that Buy Canadian aspects of federal procurement processes are not subject to review by the Canadian International Trade Tribunal.
This approach will extend to all federal agencies and Crown corporations and support Canadian social enterprises.
The government will set up a Small and Medium Business Procurement Program.
Budget 2025 proposes to provide $98.2 million over five years, starting in 2026-27, and $9.8 million ongoing to Public Services and Procurement Canada and $7.7 million over three years, starting in 2026-27, to the Treasury Board Secretariat to support the implementation of the new Buy Canadian Policy.
Budget 2025 also proposes to provide $79.9 million over five years, starting in 2026-27, to Innovation, Science and Economic Development Canada to support the new Small and Medium Business Procurement Program.
The following initiatives may also be of interest:
Chapter 1: Building a stronger Canadian economy
The government is introducing a Productivity Super-Deduction to encourage businesses to make new capital investments that improve efficiency and competitiveness. This initiative combines a range of accelerated write-off and expensing measures that allow companies to recover investment costs more quickly through the tax system. Immediate expensing (100% write-off) for investments in:
- Manufacturing and processing machinery and equipment
- Clean energy and energy conservation equipment
- Zero-emission vehicles
- Technology and data infrastructure (computers, patents, and networks)
- Scientific research and experimental development project
New expensing rules will also apply to manufacturing and processing buildings used before 2030, phased out gradually between 2030 and 2033. For the energy sector, accelerated capital cost allowances (CCAs) will be reinstated for low-carbon liquefied natural gas (LNG) facilities, with higher deductions for those achieving top-tier emissions performance.
Strengthening Artificial Intelligence and Digital Infrastructure
- $925.6 million over five years will go toward developing a sovereign public AI compute infrastructure to expand national AI computing capacity and ensure secure, domestic access for public and private research.
- The Minister of Artificial Intelligence and Digital Innovation will work with the private sector to identify new AI infrastructure projects and formalize them through memoranda of understanding.
- The Canada Infrastructure Bank (CIB) will be authorized to invest directly in AI-related projects.
- Statistics Canada will receive $25 million to create a new Artificial Intelligence and Technology Measurement Program (TechStat) to track AI use, adoption, and its impact on jobs and the economy.
- The National Research Council’s Photonics Fabrication Centre will explore new ways to attract private capital and expand research linked to AI and advanced computing.
- Clean Economy and Energy Transition – To support the transition to a net-zero economy, the government will enhance and expand its suite of Clean Economy Investment Tax Credits, which now cover clean electricity, hydrogen, carbon capture, and manufacturing.
- Clean investment credits range from 15% to 60%, depending on the type of project.
- These credits are now fully legislated and can be claimed through the Canada Revenue Agency.
- The Clean Electricity Investment Tax Credit will be extended to include waste-biomass and small modular nuclear energy systems.
- The availability of the Carbon Capture, Utilization, and Storage (CCUS) credit will be extended by five years to 2035.
- The list of eligible critical minerals for the Clean Technology Manufacturing Tax Credit will be expanded to include antimony, indium, gallium, germanium, and scandium, materials vital to clean tech, semiconductors, and defence applications.
Critical Minerals and Supply Chain Development
The government is making significant new investments to strengthen Canada’s role in global critical mineral supply chains that support clean technology, electric vehicles, and defence industries.
- A $2 billion Critical Minerals Sovereign Fund will provide strategic investments through equity, loan guarantees, and offtake agreements.
- A $371.8 million First and Last Mile Fund will help advance projects from exploration to production, with up to $1.5 billion in leveraged support through 2029-30.
- The Critical Mineral Exploration Tax Credit (CMETC) will be expanded to include 12 new minerals essential to defence, semiconductors, and clean energy, such as chromium, manganese, tin, tungsten, and niobium.
Infrastructure and Trade Corridors
- The Canada Infrastructure Bank’s capital will be increased from $35 billion to $45 billion, enabling it to fund more “nation-building” projects across sectors.
- The Arctic Economic and Security Corridor will build all-weather, dual-use infrastructure, connecting communities, supporting critical mineral projects, and strengthening northern defence capabilities.
- Funding of $213.8 million over five years will support the new Major Projects Office, tasked with fast-tracking regulatory approvals and reducing red tape for large-scale infrastructure and industrial projects.
Chapter 2: Shifting from reliance to resilience
Agriculture and Agri-Food
- Budget 2025 allocates $639 million over five years to support farmers and producers:
AgriStability enhancements:
- Higher compensation rates (from 80% to 90%) and a new payment cap of $6 million per farm.
- AgriMarketing Program: $75 million for expanding international market access for agriculture, fish, and seafood products.
- Advance Payments Program: temporary increases to interest-free limits for producers to improve cash flow.
- Biofuels Production Incentive: $372 million over two years to support domestic biodiesel and renewable diesel producers and ensure stability in the clean fuel market.
The Canadian Food Inspection Agency (CFIA) will also receive:
- $76 million to modernize digital trade tools and use AI to simplify export certification, reduce errors, and enhance product traceability.
- $32.8 million to expand international market access for Canadian agricultural products.
Manufacturing, Trade, and Industry Diversification
- A $5 billion Strategic Response Fund will support companies impacted by tariffs or supply disruptions, helping them retool and enter new markets.
- $1 billion for Regional Development Agencies to help local firms, including manufacturers and exporters, adjust to global trade challenges.
- A Buy Canadian Policy will make it preferential by default / where possible for federal agencies and Crown corporations to prioritize Canadian products and technology in procurement (details above).
Infrastructure and Defence
- The $5 billion Trade Diversification Corridors Fund will invest in ports, rail, and digital infrastructure to support Canada’s goal of doubling non-U.S. exports within a decade. These programs will strengthen northern sovereignty, expand export capacity, and enhance Canada’s trade and defence logistics networks.
Workforce Development and Training
To help Canadians transition into high-demand sectors like technology, clean energy, and manufacturing:
- $570 million will be invested in retraining programs through Labour Market Development Agreements.
- $382.9 million will create Workforce Alliances and a Workforce Innovation Fund to link employers, unions, and training providers.
- New digital platforms will connect job seekers to training and employment opportunities.
Chapter 3: Empowering Canadians
Supercharging Home Building Across the Country
- Launching Build Canada Homes (BCH)
BCH will help tackle homelessness by expanding transitional and supportive housing in partnership with provinces, territories, municipalities, and Indigenous communities. It will also build deeply affordable community and co-op housing for low-income households, while working with private and non-profit builders to increase the supply of affordable homes for the Canadian middle class. - Training the Next Generation of Canadian Buildings
$75 million over three years, starting in 2026-27, to Employment and Social Development Canada to expand the Union Training and Innovation Program, which supports union-based apprenticeship training in the Red Seals trades. - Building More Multi-Unit Homes
Increase the Canada Mortgage Bond (CMB) annual issuance limit from $60 billion to $80 billion, starting in 2026 to unlock thousands of new housing units per year. This will increase access to cost-effective mortgage funding for lenders, helping them offer more mortgages and support the construction of new multi-unit housing across Canada. The increase will apply exclusively to multi-unit housing. The government will maintain the current pace of its purchases of CMBs, up to $30 billion annually, to allow the private market full access to the additional issuance. - Supporting Indigenous Housing and Infrastructure
Build Canada Homes will work with First Nations, Inuit, and Métis leadership to determine how this mission-driven organization and the catalyzation of this new modern housing industry can best contribute to First Nations, Inuit, and Métis identified needs and priorities. Together with funding that is already working to support housing for First Nations on reserve, Inuit, and Métis communities, there remains over $3 billion available for First Nations, Inuit, and Métis to advance their housing priorities. - The government is also increasing the Canada Infrastructure Bank’s target for investments in Indigenous infrastructure that benefit First Nations, Inuit, and Métis communities from at least $1 billion to at least $3 billion across its priority sectors.
Tackling Affordability
- Lowering Costs and Protecting Consumers
Government will review fees charged by banks and other federally regulated financial institutions including Interac e-Transfer fees and ATM fees. - Protecting Against Economic Abuse
Budget 2025 Initiative: Budget 2025 proposes to introduce a voluntary Code of Conduct for the Prevention of Economic Abuse for federally regulated banks. This code, to be overseen by the Financial Consumer Agency of Canada, will set clear expectations for how banks can identify, prevent, and respond to economic abuse to better protect Canadians.
Protecting Workers Against Improper Classification
- To crack down on employers that misclassify employees, Budget 2025 proposes to provide $77 million over four years starting in 2026-27, with ongoing funding of $19.2 million annually, for CRA to implement a program that addresses non-compliance related to personal services businesses, as well as lift the moratorium on reporting fees for services in the trucking industry.
- Proposes to amend the Income Tax Act and the Excise Tax Act to allow the CRA to share information with the Department of Employment and Social Development Canada for the purpose of addressing worker misclassification.
Advancing the Youth Climate Corps
- Proposes to provide $40 million over two years, starting in 2026-27, to Employment and Social Development Canada, to create a Youth Climate Corps to provide paid skills training for young Canadians. They will be trained to quickly respond to climate emergencies, support recovery, and strengthen resilience in communities across the country. The skills training and work experience opportunities created through a Youth Climate Corps support reducing youth unemployment, increasing innovation, and strengthening adaptation and mitigation projects.
- Improving Access to Health Care in the Arctic and the North – To improve health care access and services, Budget 2025 announces the government’s intention for the Minister of Health and the Minister of National Defence, in collaboration with the Minister of Indigenous Services and the Minister of Northern Affairs and Arctic Affairs, to undertake a comprehensive assessment of health care and health infrastructure needs in the North, with the goal of identifying innovative ways to increase access to health care in northern communities and reduce medical travel costs through engagement with Northen and Arctic Indigenous Peoples.
Chapter 4: Protecting Canada's sovereignty and security
Rebuilding, Rearming, and Reinvesting in the Canadian Armed Forces
- $81.8 billion over five years on a cash basis, starting in 2025-26, to rebuild, rearm, and reinvest in the Canadian Armed Forces (CAF). This includes over $9 billion in 2025-26 that was announced by the Prime Minister in June 2025.
Key investments include:
- $20.4 billion over five years, to recruit and retain a strong fighting force, including generational pay raises for the CAF, and support CAF health care.
- $19.0 billion over five years to repair and sustain CAF capabilities and invest in defence infrastructure, including expanding ammunition and training infrastructure.
- $10.9 billion over five years for upgrades to Department of National Defence, CAF, and Communications Security Establishment digital infrastructure, including those needed for modern warfare, such as cyber defence.
- $17.9 billion over five years to expand Canada’s military capabilities, including investments in additional logistics utility, light utility, and armoured vehicles, counter-drone and long-range precision strike capabilities, and domestic ammunition production, among other investments.
- $6.6 billion over five years, starting in 2025-26, to strengthen Canada’s defence industry through a Defence Industrial Strategy. As the Strategy is implemented, starting with initial investments announced in Budget 2025, we will develop our defence industrial base so that more of our military capabilities are procured from Canadian supply chains. (See below for additional details).
- $6.2 billion over five years to expand Canada’s defence partnerships, including expanded military assistance to Ukraine and increased military training and international policy programming.
- $805 million over five years to the Canadian Coast Guard, the Canadian Security Intelligence Service, and Public Services and Procurement Canada for complementary initiatives to support Canada’s defence capabilities.
Launching the Defence Industrial Strategy
- The government is launching a new Defence Industrial Strategy. This strategy will ensure Canada’s defence investments are now guided by a whole-of-government approach to building sovereign defence capacity—creating high-paying careers, opportunities for businesses, and sourcing Canadian resources in the process.
Initial Investments Under the Defence Industrial Strategy include:
- $68.2 million over three years, starting in 2025-26, to the Department of National Defence (DND), Innovation, Science and Economic Development Canada (ISED), the National Research Council (NRC), and the Communications Security Establishment to establish the Bureau of Research, Engineering and Advanced Leadership in Innovation and Science (BOREALIS).
- $1.0 billion in 2025-26 to create a new Defence and Security Business Mobilization Program at the Business Development Bank of Canada to provide loans, venture capital, and advisory services to help small-and medium-sized businesses contribute to Canada’s defence and security capabilities.
- $656.9 million over five years, starting 2025-26, to ISED to develop and commercialize dual civilian-military technologies in a range of industries, including aerospace, automotive, marine, cybersecurity, artificial intelligence, biodefence, and life sciences.
- $334.3 million over five years, starting in 2025-26, to ISED, NRC and the National Science and Engineering Research Council for a suite of measures to help anchor quantum technology companies in Canada and provide pathways to technology adoption in defence-related applications and industries.
- $443.0 million over five years, starting in 2025-26, to Natural Resources Canada and ISED to support the development of innovative critical minerals processing technologies, support joint investments with Allies in Canadian critical minerals projects, and develop a critical minerals stockpiling mechanism to strengthen Canadian and Allied national security.$182.6 million over three years, starting 2025-26, to DND to establish a sovereign space launch capability.
A New Defence Investment Agency (DIA)
- $30.8 million over four years, starting in 2026-27, with $7.7 million ongoing to Public Services and Procurement Canada to establish the DIA. The DIA will accelerate the delivery of goods and services to better meet the needs of the CAF at the best value for Canadians by centralising processes and enhancing engagement and collaboration with Canadian industry and international partners. The Agency’s focus will be on defence procurements valued at $100 million and above, including submarines and other critical capabilities that the CAF requires.
- $52.5 million over five years, starting in 2026-27, with $12.2 million ongoing to Public Services and Procurement Canada to modernise and increase capacity for the Industrial Security Program to meet the needs of the DIA and support Canada’s defence industry.
Strengthening Canada’s Presence:
- Operations REASSURANCE and AMARNA – $2.7 billion over three years on a cash basis, starting in 2026-27, to DND in support of the renewal of Operation REASSURANCE. Operation REASSURANCE will remain the CAF’s largest overseas mission.
- $300.1 million over three years on a cash basis, starting in 2025-26, to DND and the Communications Security Establishment to support Operation AMARNA. This will be partly offset by $155.8 million over three years of existing DND resources.
Strengthening Federal Law Enforcement
- $1.7 billion over four years, starting in 2026-27, with $591.9 million in 2030-31, $227.1 million in remaining amortisation, and $500.3 million ongoing for the Royal Canadian Mounted Police (RCMP) to strengthen the organisation’s response to a wide range of threats related to transnational organised crime, financial crimes and money laundering, while enhancing its intelligence and national security capacity. This would fulfill the government’s commitment to hire 1,000 RCMP personnel.
- $90.1 million over four years, starting in 2026-27, and $22 million ongoing to the RCMP to increase the cadet recruitment allowance to $1,000 per week. This will be partly offset by $20 million over four years, $9.8 million in 2030-31 and $9.4 million ongoing in expected revenue from contract policing partners. This will better attract and maintain qualified and diverse RCMP candidates.
Establishing a Financial Crimes Agency
- Budget 2025 will leverage investments in federal law enforcement capacity outlined above, to establish a new Financial Crimes Agency to be Canada’s lead enforcement agency against financial crimes. This agency will be a best-in-class model that aims to unite the police and civilian expertise needed to investigate complex cases of money laundering, organised criminal activity, and online financial scams, and to recover illicit proceeds. The Minister of Finance and National Revenue will work with the Ministers of Justice and Public Safety to introduce legislation to stand up this agency by Spring of 2026.
- Enhancing the Canada Border Services Agency – $617.7 million over five years, starting in 2025-26, with $51.3 million in remaining amortisation and $198.3 million ongoing for the Canada Border Services Agency (CBSA) to increase its capacity to detect and intercept illicit goods, and defend Canadian industries by enforcing import measures and bolstering its trade remedy capacity. Budget 2025 will also increase the CBSA’s recruit stipend from $125 to $525 per week.
- Budget 2025 proposes to amend the Public Service Superannuation Act to extend the operational service early retirement program to frontline CBSA officers and other eligible frontline employee groups in the Public Service Pension Plan, so that they receive pension benefits that reflect the weight of their responsibilities, at a cost of $216.8 million over five years, starting in 2025-26, and $10.8 million ongoing.
Canada Community Security Program
- Minister of Public Safety will engage with the impacted communities to develop a comprehensive and equitable approach, including through reforms to the Canada Community Security Program, to ensure Canadians are no longer afraid because of who they are, how they worship, or where they gather. More details to be announced in due course.
- Modernizing the Meteorological Service of Canada – $2.7 billion over nine years, starting in 2025-26, with $57.4 million in remaining amortisation, to replace the MSC’s High-Performance Computing solution, put in place back-up systems in a separate location, and modernise the HPC operations.
Renewing Canada’s National Public Alerting System
- $55.4 million over four years, starting in 2026-27 and $13.4 million ongoing to Public Safety Canada to support a new National Public Alerting System model, ensuring Canadians continue to receive Amber Alerts and warnings of imminent natural disasters, extreme weather events and security threats so they can take action to protect themselves and their communities.
Improving Preclearance at Canada’s Borders
- $14.8 million over four years, starting in 2026-27, with $1.1 million in 2030-31 and $20.6 million in remaining amortisation, to Transport Canada to develop and implement a new preclearance access regime, ensuring a more secure transportation system for Canadians. Funding will also enable Transport Canada to invest in digital solutions to maximise efficiency in security screening activities, supporting timely onboarding of employees in transportation facilities across Canada. This will complement the opening of the new preclearance facility at Billy Bishop Airport, for which the government invested $30 million into in 2023.
Removing Assault-Style Firearms from Our Streets
- Budget 2025 proposes to realign previously announced funding for a net fiscal impact of $38.7 million over three years, starting in 2025-26, to allow for the continuation of the Assault-Style Firearms Compensation Program. The program will be implemented in the most efficient and cost-effective way possible, within its existing funding envelope of $742 million.
Strengthening Canada’s Emergency Management
- $257.6 million over four years, starting in 2026-27, to Natural Resources Canada to lease four aircraft to bolster provincial and territorial aerial firefighting capacity.’
Combatting Financial Fraud
- Budget 2025 announces the government’s intention to develop a whole-of-government National Anti-Fraud Strategy. This strategy will bring together financial institutions, technology, and telecommunication companies to develop a cross-sectoral approach to protect Canadians from evolving and highly complex fraud schemes.
- Budget 2025 also announces the government’s intention to amend the Bank Act and make relevant regulations to:
- Require banks to have policies and procedures to address consumer-targeted fraud.
- Allow consumers to adjust maximum transaction amounts, and require banks to obtain the express consent of consumers to enable certain account features and permit consumers to disable features they do not need, with these features to be prescribed in regulation.
- Require banks to report data on consumer-targeted fraud to the Financial Consumer Agency of Canada, with the specific data points to be prescribed in regulation. Anonymised data would subsequently be reported to the Minister of Finance to inform the government’s future policymaking on financial fraud.
Ensuring Crime Doesn’t Pay
- Budget 2025 proposes to protect businesses from being abused by criminals by amending the PCMLTFA and its regulations to address the most prevalent forms of cash-based money laundering by restricting: large cash transactions of $10,000 or more; and the depositing of cash by one person to another person’s account (i.e., third-party cash deposits)
- To support the new Integrated Money Laundering Intelligence Partnership (IMLIP), Budget 2025 proposes amendments to the PCMLTFA with related amendments to the Personal Information Protection and Electronic Documents Act to clarify public-to-private information sharing.
Chapter 5: Creating a more efficient and effective government
Stand up an Office of Digital Transformation which will proactively identify, implement, and scale technology solutions across the federal government. The Office will identify and eliminate redundant and counterproductive procurement rules as well as leverage expertise from internal sources and the private sector to hasten AI adoption.
Budget 2025 also announces that Shared Services Canada, in partnership with the Department of National Defence and the Communications Security Establishment, will develop a made-in-Canada AI tool that can be deployed across the federal government. Shared Services Canada will partner with leading Canadian AI companies to develop this internal tool. By supporting innovative research to strengthen public services, this work will protect our digital sovereignty, keep government data and information safe in Canada, and create opportunities for the Canadian technology sector.
Artificial Intelligence in Government Operations
Technology-Driven Efficiency
Artificial Intelligence in Government Operations
- Shared Services Canada, working with the Department of National Defence and the Communications Security Establishment, will develop a made-in-Canada AI platform for government-wide use.
- This initiative will protect Canada’s digital sovereignty, improve cybersecurity, and support the domestic AI industry.
Technology-Driven Efficiency
- Departments will integrate AI and automation to reduce costs and improve services:
- Transport Canada will automate back-office functions and move toward self-service systems.
- Public Services and Procurement Canada will digitize procurement documentation to enhance transparency and efficiency.
- Shared Services Canada will deploy automation to handle IT requests, cutting support costs and improving service times.
Fiscal Responsibility
The government plans to save $7.75 billion over three years by streamlining operations, consolidating overlapping programs, and increasing automation and AI-driven productivity in service delivery.