The Carney government is attempting to counter accusations of austerity as Finance Minister François-Philippe Champagne announced plans for "sustained funding" for gender equality initiatives. However, concerns are rising that the government may implement significant budget cuts in the upcoming budget, as highlighted by a recent report from the Canadian Centre for Policy Alternatives.

The report indicates that the government may achieve its mandated 15 percent budget cuts across 32 of 84 departments by allowing certain programs to expire without renewal. An additional 20 departments could reduce their budgets by five percent through similar measures. If these programs are not renewed, all associated staff positions and contracts would end. The Women and Gender Equality department is particularly vulnerable, as it has few permanent programs. This vulnerability was evident when Minister Rechie Valdez expressed relief over securing more than $600 million in long-term funding for her department.

Other departments, including Crown-Indigenous Relations, Environment, Transport, Immigration, and the Public Health Agency, may face tougher circumstances. Spending on Indigenous issues, which has increased fourfold over the past decade, could be especially at risk. The report's authors, David Macdonald and Erin McIntosh, warned that Canadians should prepare for potentially severe budget cuts, describing the upcoming budget as one of the most stringent in federal history.

Champagne's announcement of funding for gender equality programs appears to be a strategic move to appease the Liberal party's progressive faction. The minority government is under pressure to maintain support from its MPs as the budget approaches a vote. The possibility of losing a confidence vote looms, although NDP interim leader Don Davies did not explicitly state that his party would oppose the budget, despite their stance against austerity measures.

The Liberal government’s potential cuts to social programs may seem contradictory. However, former Privy Council clerk Michael Wernick noted that significant savings require targeted program reviews. He suggested that spending restraint would not be a one-time action but rather a prolonged effort, similar to the multi-year budgets implemented by former finance minister Paul Martin in the mid-1990s.

During that period, Canada faced economic challenges, leading to a 19 percent reduction in federal spending and a significant decrease in the public service workforce. The budget was balanced, and the Liberal party maintained high popularity, culminating in a majority win for Prime Minister Jean Chrétien in 1997.

Current economic conditions have prompted discussions about the size of the budget deficit, which could reach $100 billion. National Bank Financial's Stefane Marion emphasized that the government's actions regarding the deficit will be more critical than its size. Carney has committed to fostering faster growth, increased investment, and achieving a balanced operating budget within three years. Marion expressed optimism that Carney can effectively communicate that Canada is ready for business again, despite the challenges ahead.