Finance Minister Francois-Philippe Champagne feels he has a good story to tell amid big challenges continentally and geopolitically in what is Canada’s first-ever Spring Economic Update.
The deficit and unemployment are down. The country’s growth is expected to remain strong, with the second fastest pace in the G7 for the next two years. As a net energy exporter, Canada has weathered the Middle East war and resulting oil prices well. Prime Minister Mark Carney’s plan to diversify Canadian trade is bearing fruit already.
But the details tell a more nuanced story. The document is speckled with the aphorism “what we can control” – a Carney favourite. That seems to be limited. Real GDP growth actually is anemic, and inflation is up. Food prices are especially hard to control, and the public is feeling the strain.
The document replaces the traditional fall economic update now that the annual budget has moved to fall. This one pumps Canada as a safe place to invest amid global uncertainty, with a government committed to attracting foreign capital while investing in affordability.
The big capital program? A $25-billion sovereign wealth fund – Canada Strong Fund – seeded with public funds. The consumer support? A modest ($133 average) annual cut to Canada Pension Plan contributions, a delay to payback timelines for first-time home buyers who borrow from their RRSP, and $755 million for sport from “the playground to the podium.”
Here’s what you need to know about Spring Economic and Fiscal Update 2026:
The big numbers
- $37.5 billion – in new spending over six years, including the Canada Groceries and Essentials Benefit and the temporary suspension of the federal fuel excise tax.
- $66.9 billion – deficit for 2025/26, down $11.5 billion from Budget 2025
- 2.5 per cent – projected CPI inflation in 2026, falling to 1.9 per cent in 2027
- 6.5 per cent – projected unemployment, down from 6.8 per cent in Budget 2025
- 2.25 – projected policy rate from the Bank of Canada in 2026, starting to rise in early 2027 and projected to hit 2.7 per cent in 2028
- 3.4 per cent – projected average 10-year bond rate in 2026, rising to 3.6 per cent in 2027 and then to 3.7 per cent from 2028, about 10 basis points higher than projected in the fall budget.
The Canada Strong Fund
A new $25-billion dollar “sovereign wealth fund” will be launched with government funds. (Sovereign wealth funds globally are usually funded through resource royalties as opposed to general revenue.)
The fund will be run by a standalone Crown corporation operating at arm’s length and will seek to match public funds with private capital. The concept is that Canadians will eventually be able to invest directly through a bond-like product in major projects, but many details are still to come, with a “Canada Strong Fund Transition Office” to consult on those.
Changes to how government regulates – and does – business
The document furthers Carney’s plan to reduce the size of the public service while investing heavily in defence. It also promises to continue to review and refine how the government uses third-party consultants and how it can most effectively implement Buy Canadian policies.
A $2-billion investment in developing Canada’s workforce through more apprenticeships and skilled trades is meant to help to ensure workers for the planned resources-focused infrastructure projects. There has been a shortage for years. The plan is to add 100,000 new members to the Red Seal trades contingent through more recruitment, additional business incentives and a $5,000 award upon certification.
The document also provides $103.8 million to establish the Defence Investment Agency as a stand-alone entity to implement the Defence Industrial Strategy. This builds on the government’s existing investments that mean Canada has hit, for the first time, the NATO target to spend at least two per cent of GDP on defence.
As well, the document promises to launch a “Whole-of-Government Competition Plan to strengthen productivity and affordability by ensuring that competition is prioritized throughout the federal government’s policies.” In other words, the government says it will work harder to ensure that it isn’t unintentionally hampering competition in a way that drives up prices for Canadians, whether in banking, retail, energy or telecom. The “how” is still to come.
Building (more) new homes
The government continues to invest substantially in getting more homes built. The document goes further:
- Invest $41.9 million over five years to streamline National Building Code requirements for modern methods of construction (or modular) housing. This means making it easier to inspect and approve building components in factories and to reduce on-site permitting delays, as well as making it possible to build a housing component in one province and ship and assemble it in another.
- Support R&D in the sector and help incentivize adoption of modern methods of construction.
- Work with industry to modernize housing data collection, tracking and monitoring.
- Consider modernizing mortgage products through 30-day consultations, which could include permitting private mortgage insurers to offer multi-unit mortgage loan insurance on five- to eight-unit residential properties, and supporting more flexibility for mortgage insurers to offer products to borrowers building new three- and four-unit housing.
- Accelerate the already planned $7-billion investment in the Apartment Construction Loan Program (ACLP) within CMHC, which aims to make it easier for builders to finance new rental construction.
- Consult on potential financing options to support market housing in advance of Budget 2026. This might include an “ACLP-style” program for home ownership managed through CMHC.
- Extend the grace period for the Home Buyers’ Plan withdrawal from Registered Retirement Savings Plans (RRSP) from two years to five, for participants making a first withdrawal between January 1, 2026, and December 31, 2028. This extended grace period already applies to withdrawals made between 2022 and 2025.
Pocketbook politics
The document outlines policies to help Canadians while also trying to make sense of macroeconomic headwinds beyond the scope of Ottawa. These include plans to:
- Help families with rising food costs, with a previously announced boost to the income-tested HST rebate;
- Lower food costs over the longer term by increasing food security and sovereignty through investments in greenhouse infrastructure and Canadian-made innovation and agriculture;
- Continue the pause on increases to the excise tax on alcohol – welcome news for domestic wine, beer and spirits producers;
- Bring down costs with an ongoing crackdown on excess fees in banking, high mobile phone bills and grocery prices;
- Cut CPP contributions for all employees and employers. This will take effect Jan. 1, 2027 and builds on the middle-class tax cut rolled out this year. This is $133 back in families’ pockets – and $133 back for each employee on payroll at Canadian companies, based on an employee making $70,000;
- Protect the Southern Resident Killer Whale population and other whales in B.C. with more than $91-million in funding – a clear signal the government is trying to balance environmental concerns about plans to increase pipelines to and shipping from the Port of Vancouver.
- The $755 million in sport-related funding will assist athletes and sports organizations directly as well as refresh community infrastructure like skating rinks and pools.
Tackle AI, eventually
Amid growing concerns about unregulated AI and chatbots, the document hints at the direction of the government’s much-awaited AI strategy. It outlines six pillars for the approach:
- Protecting Canadians and Safeguarding our Democracy
- Empowering Canadians
- Powering AI Adoption for Shared Prosperity
- Building the Canadian Sovereign AI Foundation
- Scaling Canadian Champions
- Building Trusted Partnerships and Global Alliances
Opposition reaction
Conservative leader Pierre Poilievre described the economic update as a “credit card budget,” and called on the Prime Minister to keep the deficit to $30 billion, less than half of what the Liberal government announced. Canadians can expect Poilievre to focus on this deficit spending, and display particular ire for the Sovereign Wealth Fund, judging it to be unnecessary and more a ‘trade war bond’ than a sovereign wealth fund.
The Liberals now, of course, enjoy a majority government. But there is something of a silver lining for Poilievre. He can forcefully oppose the government’s direction without fear of prompting a snap election that could have reduced his party’s seat count and weakened his leadership standing.
What’s next
The House will debate and adopt the economic update. Champagne will table enabling legislation with regulations to follow. There will be no high-drama confidence votes.
But there are still many ways to engage in terms of program design and delivery. A myriad of new programs – some announced today and some announced previously – require extensive consultation. Team Vantage is ready to support you and your business as you navigate what all of this means for you.
If you’re looking for more information about the Spring Economic Update, contact us today at info@mcmillanvantage.com.
Team Vantage is here to help you navigate this fast-changing environment and position your company for success.
