Federal Budget 2025: A Business Perspective
Budget 2025 sets out an ambitious plan to strengthen Canada’s economic foundations through large-scale investments and targeted tax measures. Against a backdrop of global trade tensions, elevated tariffs and slowing growth, the government seeks to pivot toward productivity, competitiveness and resilience. While deficits are projected to rise, spending is concentrated on areas that aim to build infrastructure, accelerate innovation and reduce reliance on a single trade partner. Alongside these measures, tax incentives are designed to encourage private investment. Whether these efforts succeed will depend on execution, but the intent is clear: reduce barriers, foster growth and position Canada for long-term strength.
Economic Landscape
Global uncertainty continues to weigh on Canada’s outlook. US tariffs remain at historic highs, global growth is slowing and unemployment sits at nearly 7%, with youth unemployment at over 14%. Inflation is within the Bank of Canada’s target range, and interest rates have eased to 2.25%, offering some relief. Despite these challenges, Canada retains the lowest general government net debt-to-GDP ratio in the G7 at about 13%, giving the government fiscal room to invest without compromising stability.
Major Investments
Budget 2025 prioritizes investment supported by bureaucratic efficiency, with commitments to cut red tape and accelerate approvals for major projects. Over the next five years, the government plans approximately $280 billion in capital investments across infrastructure, housing, defence and productivity. This includes $115 billion for infrastructure, $30 billion for defence and security, $110 billion for productivity and competitiveness, and a projected $25 billion for housing. These investments seek to modernize trade corridors, strengthen sovereignty and catalyze private sector innovation.
For businesses, these measures represent opportunities rather than guarantees. Infrastructure projects could drive demand for construction, engineering and logistics. Defence modernization may spur growth in advanced manufacturing and technology, while clean energy and artificial intelligence (AI) initiatives aim to attract venture capital and private equity.
Opportunities for Businesses and Investors
Beyond infrastructure, the budget introduces initiatives to reshape Canada’s business environment. Trade diversification efforts seek to reduce reliance on the US through investments in ports, airports and trade corridors. Innovation funding, as well as research and development incentives, aims to strengthen Canada’s position in AI, quantum computing and advanced technologies. Clean economy measures, including investment tax credits and critical mineral strategies, are designed to attract capital into renewable energy and electric vehicle (EV) supply chains. Housing programs are intended to stimulate residential construction and related industries, while immigration reforms and credential recognition seek to ease labour shortages in healthcare, construction and technology. Many of these initiatives are supported by streamlined approval processes designed to foster predictability for long-term investments.
Tax Measures and Incentives
Tax policy continues to play an important role in Canada’s business strategy, and Budget 2025 introduced new measures while reinforcing earlier ones. For example, the Productivity Super-Deduction—highlighted in the budget—now includes immediate expensing for manufacturing and processing buildings, along with a broad range of capital investments such as clean energy assets, patents, and research and development. Similarly, the enhanced Scientific Research and Experimental Development (SR&ED) tax credit raises the expenditure limit from $4.5 million to $6 million. A new tax measure introduced in Budget 2025 was the elimination of the Underused Housing Tax. Other changes, announced earlier, include reducing the lowest personal income tax rate, reversing the planned increase in the capital gains inclusion rate, removing the federal carbon price, and lowering counter-tariffs on US imports.
Implications for Businesses
Budget 2025 outlines measures aimed at supporting investment, innovation, and competitiveness within the Canadian economy. Firms that take advantage of tax incentives, embrace opportunities in infrastructure and clean tech, and prepare for a broader trade landscape will better position themselves to gain a competitive edge. For investors, these measures are intended to create fertile ground for capital deployment in sectors such as construction, technology and clean energy. Budget 2025 serves as a roadmap for Canada’s future, with its success hinging on the effective execution of key initiatives. In a context of global uncertainty, understanding the budget’s provisions can help organizations assess risks and identify areas for strategic adjustment.