Carney Government Unveils 2026 Federal Budget With $151.5 Billion in New Spending
Canada's 2026 federal budget outlines $151.5 billion in new spending over five years, featuring a $25-billion sovereign wealth fund, capital gains exemptions, and permanent residency for 200,000 temporary residents, while projecting a $62.3-billion deficit for 2026-27.
The Carney government has presented its 2026 federal budget, outlining $151.5 billion in new spending over five years compared with the spring economic update. The fiscal plan aims to boost private-sector investment and advance major nation-building projects, including an effort to double the capacity of Canada’s energy grid.
To support these goals, the government plans to merge two major federal financing agencies and establish a standalone $25-billion sovereign wealth fund. New spending also includes long-term funding for infrastructure in Indigenous communities, housing plans intended to end homelessness, and measures under the Powering Canada Strong action plan.
On the tax front, the budget introduces a new exemption from capital gains of up to $15 million on investments in eligible Canadian companies, alongside an enhanced small-business rollover of taxes. In immigration policy, Ottawa is introducing a one-time measure to grant permanent residency to 200,000 temporary residents already in Canada.
The budget projects a deficit of $62.3 billion for the 2026-27 fiscal year, which is expected to decline to $52.9 billion by 2030-31. Federal debt is slated to hit $1.36 trillion in 2026-27 and grow by an additional $227 billion by 2030-31. Critics have noted that the plan slows deficit reduction more than fiscal hawks would like and lacks broad corporate tax cuts.
In defence, reducing the scale of planned spending increases means there will be no further progress toward meeting Canada’s NATO military expenditure targets.
Beyond the budget, global markets experienced significant volatility. U.S. stocks suffered their worst day since April 2025 due to worsened AI sentiment following the Democrats’ election sweep in the U.S. midterms, which triggered a steep rout in technology stocks amid fears of increased regulatory scrutiny of AI. European indices also fell sharply, with the STOXX 600 down 1.8 per cent, the FTSE 100 sliding 2.21 per cent, the DAX falling 2.33 per cent, and the CAC 40 dropping 1.82 per cent. In Asia, the Nikkei closed 5.96 per cent lower and the Hang Seng dropped 1.27 per cent. The Canadian dollar traded at 71.09 U.S. cents.
Domestically, Canadian employment data for October is expected to show a 0.1 per cent gain. A positive shift is predicted for the Canadian auto sector following the U.S. midterms, while a forestry town in New Brunswick braces for uncertainty as a local mill goes quiet.