Prime Minister Mark Carney has taken office with a commitment to economic growth, distancing his administration from the divisive politics of the previous Trudeau government. His first major test, Budget 2025, has been met with mixed reviews. While it includes some positive initiatives, critics argue it largely adheres to the Liberal strategy of extensive government spending and centralized economic planning.

The government has emphasized the need for Canadians to “spend less so we can invest more,” a statement some view as contradictory. Officials claim to have identified $59.6 billion in savings over the next five years. However, this figure pales in comparison to the projected $78.3 billion deficit for the current fiscal year, which is expected to push Canada’s net debt to nearly $1.5 trillion.

For perspective, in 1994, Canada faced a public debt crisis with a deficit of $45.7 billion, equivalent to about $87.7 billion today. At that time, the net public debt was approximately $511 billion, or $983 billion in real dollars. Just a year ago, the Liberals had promised to reduce the deficit to $42.2 billion but missed that target by nearly 86 percent. Current forecasts indicate that Ottawa will still be running a $57 billion deficit by the end of the decade, a figure likely to rise if the current government remains in power.

The budget also outlines plans to reduce the federal workforce by 10 percent by 2028-29, decreasing from a peak of 368,000 positions to 330,000. Even if this goal is achieved, the federal workforce will still be nearly 30 percent larger than it was when the Liberals took office in 2015, raising questions about the austerity measures proposed.

In terms of immigration, despite the government’s claims of tightening controls, the budget only proposes a modest reduction of 3.8 percent in new permanent residents, bringing the total to 380,000 per year. This figure remains 40 percent higher than the levels seen in 2015.

The budget also reflects a shift in tone regarding the oil and gas industry. Unlike previous budgets, it does not adopt an overtly antagonistic stance and acknowledges the business case for liquefied natural gas (LNG). The government attempts to frame its commitment to reducing greenhouse gas emissions as a competitive advantage, asserting that “buyers of Canada’s resources — oil and gas, steel, and aluminum — are increasingly looking for low-carbon sourcing.”

Additionally, the industrial carbon tax, which raises costs for domestic manufacturing, is presented as a pro-business measure. The budget states, “An effective industrial carbon pricing system is essential to providing certainty to businesses looking to invest and compete internationally.” It claims that this pricing will drive investment to reduce emissions and enhance the competitiveness of Canadian businesses, with minimal impact on affordability for Canadians.

The budget does include tax incentives for LNG projects and suggests a review of the previous government’s electric vehicle mandate. However, the proposed accelerated capital cost allowances for LNG projects are contingent on meeting strict emissions standards. The emissions cap is not expected to be eliminated but rather replaced with a combination of carbon markets, methane regulations, and carbon capture and storage technology.