Canada's federal budget lands today: economists urge spending restraint despite oil windfall

Canada's federal government will present Budget 2026 in Parliament at 4 p.m. ET on November 5. Reuters reported on November 5 that economists are urging Prime Minister Mark Carney's government to restrain spending: despite windfall oil revenue, new spending commitments could lead to bigger deficits in the coming years. Carney, who has run two central banks, must attract investment and ease affordability concerns while demonstrating fiscal credibility to preserve Canada's AAA credit ratings and keep borrowing costs low. (Cover photo is a file image of Parliament Hill in Ottawa.)

Budget titled 'Masters of Our Destiny', tabled at 4 p.m.

The budget document is reported to be titled 'Masters of Our Destiny' (Maître Chez Nous in French). Finance Minister François-Philippe Champagne will table it in the House of Commons at 4 p.m., after Carney chairs a cabinet meeting at 9 a.m. and meets Champagne at 3:40 p.m. A senior government source said the budget will include new affordability measures, business tax incentives, and investments in infrastructure, defence and culture.

Oil windfall does not hide the deficit risk: nearly C$140 billion in new measures

Reuters noted that almost 20 months of U.S. tariffs on some Canadian goods have upended supply chains and shrunk exports to the United States; the Iran war is pushing up gasoline and diesel prices, which policymakers say could spill into food costs soon, while higher interest rates are increasing mortgage costs. Even so, official GDP figures show the economy has held up relatively well, helped by data centre construction, higher oil revenue in the world's No. 4 producer, and government supports such as a suspension of federal fuel taxes.

But economists warn that a better-looking ledger is no licence to spend. Randall Bartlett, deputy chief economist at Desjardins, said new spending and tax measures since April's economic update total nearly C$140 billion over the next decade, and the fiscal outlook points to substantially larger deficits. Champagne told reporters in Montreal on Wednesday: 'Affordability is top of mind,' adding, 'We need to invest in our future and growth, supporting small and medium-sized businesses.' He told a business audience on Monday that the budget would include tax measures for small and medium-sized businesses, declining to share specifics.

Defence target questioned: how to pay for 4% of GDP?

Last year Carney pledged to raise defence spending to 4% of GDP by 2030, including core spending of 2.5% and ancillary spending of 1.5%, and to 5% by 2035, to meet NATO commitments. Canada currently spends 2% of GDP on defence. Pedro Antunes, chief economist at Signal 49 Research, an independent firm, said he was unsure Canada could meet its defence spending goals. 'If we are going to get there, then we need to see (in the budget) where and how that money is going to be spent,' he said. A detailed defence fiscal plan would lend credibility to Canada's ambitions, Scotiabank said in its federal budget outlook.

In last year's budget announcement, Carney said Canada would attract C$500 billion to C$1 trillion ($358 billion to $716 billion) in investments over the next five years through tax incentives and major infrastructure projects. Economists say the government must show spending restraint and explain how it will pay for its defence and infrastructure pledges without raising debt and deficit levels.

Can the fiscal discipline targets hold?

Champagne set two fiscal goals last year: for the government to balance day-to-day operating spending against revenue by fiscal year 2028-29 and to maintain a declining deficit-to-GDP ratio. Carney said in September that operating spending would balance against revenue a year earlier than targeted, but economists said a falling deficit-to-GDP ratio would be hard to sustain. Antunes said Champagne should stick to last year's fiscal goals. 'I think credibility around this has been worn thin,' he said.

(Sources: Reuters, November 5, 2026; Prime Minister's Office itinerary; RL News, November 4, 2026. $1 = 1.3972 Canadian dollars.)