Building Canada Strong, For All

Over the past year, Canadians have navigated a rapidly changing and increasingly fragmented world. One that is more complex, more volatile and, for many, more costly and unpredictable.

In response, Canada’s new government continues to focus on what we can control—building a strong Canadian economy, diversifying our trade partners abroad, delivering responsible fiscal management, and supporting Canadians who are under pressure from everyday expenses—with a boost today and a bridge to a better tomorrow.

In Budget 2025, we outlined our plan to build Canada Strong. Since then, we have moved fast to:

 

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Build the major infrastructure, homes, and industries that grow our economy and create lasting prosperity.

 

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Empower Canadians with better careers, strong public services in both official languages, and a more affordable life.

 

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Protect our communities, our borders, and our way of life.

In our first budget, we made responsible choices to reduce spending to save Canadian taxpayers $60 billion over five years. We are spending less on government operations so Canadians can invest more to build a brighter future for all. We have the right plan. We’re building big, we’re moving fast, and we’re just getting started. In the past year:

 

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15 nation-building projects have been announced that will support over 60,000 jobs and drive over $125 billion in new investment.

 

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The government launched the $1.5 billion First and Last Mile Fund as part of the Critical Minerals Strategy, which will drive billions in further investments and position Canada as a secure supplier of choice.

 

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Catalysing half a trillion dollars of investment to build Canadian industry and creating over 125,000 new jobs through our new Defence Industrial Strategy.

 

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Building demand for Canadian products, driving changes in how we build homes, and committing support for thousands of new housing units to date through Build Canada Homes’ partnerships across the country.

 

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More than 12 million Canadians will have more money in their bank accounts starting in June—up to $1,890 this year for a family of four—through our new Canada Groceries and Essentials Benefit.

 

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400,000 children have access to healthy meals, while their parents are saving $800 a year on groceries because we have made the National School Food Program permanent.

The Spring Economic Update 2026 is the next step in our plan to build a stronger, more independent, and resilient Canada for all. It advances our progress of building more affordable homes and the major infrastructure that transforms and connects our economy, while bringing down costs to help you get ahead.

We are providing a clear and transparent account of how Canada’s economy is performing in an increasingly uncertain world. This transparency is critical to lift the fog of uncertainty, help businesses seize new opportunities, and give families the confidence to plan for their future.

We are building a Canada that is not just strong, but good; not just prosperous, but fair. A Canada that is not just for some, most of the time, but for all, at all times.

We’re building Canada strong, for all.

 

 

 

 

Delivering for Canadians: Progress Since the Spring of 2025

Since the spring of 2025, Canada’s new government has taken decisive action and made targeted investments to deliver results for Canadians.

 

 

 

 

 

 

 

 

 

The Spring Economic Update 2026

The Spring Economic Update 2026 maintains Canada’s fiscal strength—while investing for Canadians where it counts to build Canada’s prosperity today and for the next generation. This includes core new investments to invest in Canada’s future, with the good-paying careers that will build a Canada that is affordable, prosperous, and safe.

 

 

 

 

 

 

 

In an Uncertain World, Canada Focuses on What it Can Control

 

 

The world is undergoing a series of fundamental shifts at a speed, scope and scale not seen in generations. Over the past two decades, a series of crises in health, energy, finances, and geopolitics have exposed the risks of extreme global integration. Today, the rules-based international order and the trading system that powered Canada’s prosperity for decades are being reshaped.

Long-standing supply chains and trade relationships that once supported stable growth, good jobs, and affordable products are being disrupted. Rising geopolitical tensions, including the conflict in the Middle East and escalating trade pressure such as U.S. tariffs, are adding to cost pressures and driving volatility in energy prices and financial markets.

 

 

 

 

 

 

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The Canadian Economy Is Resilient

In this more fragmented and unpredictable world, Canada’s approach is clear: we will be principled and pragmatic. We are acting decisively to protect our economic sovereignty, strengthen our strategic industries, and position Canada for long-term growth.

Canada starts from a position of strength. Our economic fundamentals remain among the strongest in the world, supported by:

 

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Talent: A highly skilled, adaptable, and the most educated workforce in the world.

 

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Resources: A vast reserve of critical minerals, a clean and conventional energy superpower, and a strong agri-food industry.

 

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Resilience: A strong social safety net and stable institutions.

 

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Market access: The only G7 country with comprehensive free trade agreements with all other G7 countries.

 

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Rule of law: A stable and reliable financial system, an independent judiciary, and transparent governments.

 

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Investment attractiveness: A favourable environment for investment that attracts global capital, drives growth, and creates high-paying careers.

 

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Tax competitiveness: The lowest overall tax burden in the G7 on new business investment.

 

 

 

 

 

 

 

INTRODUCTION		7

 

 

Direct Investment Into Canada at a 20-Year High

Canada is emerging as a premier destination for global investment:

 

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Direct investment into Canada is at its highest level in nearly two decades.

 

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Canada has secured $97 billion in foreign investment and more than 20 new economic and defence partnerships across four continents in the last year.

 

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A network of trade agreements spanning 51 countries and nearly two-thirds of global GDP positions Canada at the centre of a reconfigured global economy.

Momentum is building at home:

 

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Canadian institutional investors, including pension funds, are stepping up and working with governments to unlock new opportunities.

 

		Attracting New Investment   The Spring Economic Update proposes to further position Canada as a leading investment destination and a trusted convener of global capital through:   ○  Canada’s first Investment Summit in September 2026.   ○  A Sustainable Finance conference in the coming year.

 

 

 

 

 

 

Canada Is the Most Competitive Jurisdiction in the G7 for New Business Investment and Trade

 

 

 

 

 

In this environment, Canada is redefining its international, commercial, and security relationships. We must build strength at home, and we must do it while choosing to work with our allies and forging new relationships with trusted partners. We recognise the world as it is, and we choose to adapt to thrive.

 

 

 

 

 

Canada Maintains Fiscal Discipline

Our focus is clear and disciplined. We are concentrating on what we can control: maintaining fiscal sustainability while making targeted, high-impact investments for Canadians. This means lowering the operating deficit over time, maintaining our fiscal anchors, and ensuring that every dollar spent on behalf of Canadians supports growth, resilience, and improving the well-being of Canadians.

 

 

 

 

 

Our government spends less, builds more,

and delivers better–we are investing in Canada’s future.

 

 

 

 

 

Making Life More Affordable for Canadians

 

 

 

The global landscape is rapidly changing, leaving businesses, workers, and families under a cloud of uncertainty. In response, Canada’s new government is focused on what we control: building a stronger economy to bring down costs for Canadians.

Our plan is moving Canada’s economy from reliance to resilience. We are advancing major projects that connect and transform our nation, turbocharging housing construction, catalysing an entirely new housing industry, and forging new economic and security partnerships. Some of the biggest long-term payoffs of this transformation will take time to be felt. To ensure Canadians have the support they need right now, the government is providing a boost today and a bridge to a better tomorrow.

For over a year, Canada’s new government has been relentlessly focused on making life more affordable for Canadians:

 

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Nearly 22 million Canadians are keeping more of what they earn, with the middle-class tax cut saving a two-income family up to $840 this year.

 

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First-time home buyers are saving up to $50,000, with the removal or reduction of the Goods and Services Tax on new homes.

 

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The removal of the consumer carbon price driving gas prices down by about 18 cents per litre across most provinces and territories.

 

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Reducing Canadians’ bills at the gas station by up to 10 cents per litre on regular gasoline and 4 cents on diesel by temporarily suspending the federal fuel excise tax.

 

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More than 12 million Canadians will receive hundreds of dollars more in their bank accounts through the new Canada Groceries and Essentials Benefit.

 

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Canadians are paying less in banking fees, with new rules capping non-sufficient funds fees at $10 and strengthening consumer protections.

 

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Enhanced low-cost and no-cost bank accounts to offer all Canadians access to up to 50 per cent more debit transactions at a cost of no more than $4 per month.

 

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Young Canadians are gaining opportunities to work and build careers, with 175,000 placements supported in 2026-27 through Canada Summer Jobs, the horizontal Youth Employment and Skills Strategy, and the Student Work Placement Program.

 

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Starting automatic federal benefits for the 2026 tax year, with pre-filled returns for up to 5.5 million low-income Canadians by the 2028 tax year, ensures that support reaches those who need it most.

 

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Families and young people are travelling and exploring Canada for less, supported by the renewed Canada Strong Pass.

 

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Supporting Canadian brewers, distillers and wineries and helping ease cost pressures with extended tax relief.

 

 

 

 

Making Groceries and Essentials More Affordable

Our government has introduced new measures to make groceries and other essentials more affordable for Canadians:

 

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The new Canada Groceries and Essentials Benefit will provide additional, significant support for more than 12 million Canadians.

 

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Formerly the Goods and Services Tax (GST) Credit, we are increasing its amount by 25 per cent for five years as of July 2026.

 

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Combined, this means that a family of four will receive up to $1,890 this year, and about $1,400 a year for the next four years; and a single person will receive up to $950 this year, and about $700 a year for the next four years.

 

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An additional $20 million has been provided to the Local Food Infrastructure Fund to ease pressures on food banks, and immediate expensing was announced for greenhouse buildings to support increased domestic supply and investment in food production.

 

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We are providing $36 million to address food security and affordability in the North through the Nutrition North Canada Retail Subsidy Program and the Northern Isolated Community Initiatives Fund.

 

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We have made the National School Food Program permanent, which will provide up to 400,000 children with meals at school each year, helping families save an average of $800 annually.

 

 

 

 

 

 

More Competition, Lower Costs

Stronger competition pushes businesses to become more innovative and operate more efficiently. Over time, these productivity gains translate into lower costs, greater choice, and better wages for Canadians. Yet over the past two decades, competitive intensity across the Canadian economy has weakened. Strengthening competition will be essential to delivering sustained affordability gains for Canadians.

At a time when Canadians are facing heightened affordability pressures from sources beyond our control, it is more important than ever that we press harder to find opportunities for improvement within our control. To strengthen productivity and improve affordability, the Spring Economic Update 2026 launches a new Whole-of-Government Competition Plan that will take a focused and coordinated approach to ensure that competition is prioritised throughout the federal government’s policies.

The government is focusing on lower mobile and Internet plan prices by building on the 2023 direction to the Canadian Radio-television and Telecommunications Commission (CRTC) that places stronger emphasis on competition, affordability, and consumer interests with a decision to uphold a CRTC ruling on third-party access to fibre infrastructure in August 2025. The government is also implementing a Telecommunications Competition Roadmap outlining actions to improve consumer choice, pricing, and availability of services.

 

 

 

 

 

 

 

 

An Economy Built for all Canadians

 

 

As Canadians build the strongest economy in the G7, we know that some of the biggest payoffs in our plan will take time. That’s why Canada’s new government is standing with Canadians through uncertain and rapidly changing times, acting responsibly to provide support today, and making smart, long-term investments that strengthen Canada’s economy. This means creating the mechanisms to ensure Canadians thrive today and tomorrow, supporting workers and young people, supercharging the housing sector, combatting financial crimes, and investing in strong communities.

Spring Economic Update 2026 introduces a number of flagship measures:

 

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Introducing Canada’s Own Sovereign Wealth Fund–the new Canada Strong Fund

 

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Launching Team Canada Strong to recruit, train, and hire 80,000 to 100,000 new Red Seal skilled trades workers by 2030-31, aligned to Canada’s housing, infrastructure, and defence needs

 

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Making life more affordable for Canadians

 

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Building stronger and safer communities

 

Canada will establish its own sovereign wealth fund: Canada Strong Fund   The Canada Strong Fund is a new national investment initiative designed to strengthen Canada’s economy and give Canadians a direct stake in its success.   The Fund will invest in key, strategic Canadian projects and companies, creating jobs, supporting innovation, and helping Canada stay competitive in a rapidly changing world.   Canadians will have the opportunity to invest in the Fund and share in the financial returns generated by these projects.   This is about building a stronger, more independent Canada where everyone can take part and benefit.

In a more uncertain world, Canada offers stability. In a more divided world,

Canada forges partnerships. And in a more competitive world,

Canada invests decisively in its future.

 

 

 

 

Supporting Workers and Young People   Canada’s future depends on the people building it. That’s why the Spring Economic Update 2026 is focused on helping workers and young people gain the skills, experience, and support they need to succeed.   We’re making it easier to learn, train, and find meaningful opportunities:   ● Creating new opportunities for young Canadians Launching Team Canada Strong to recruit, train, and hire 80,000 to 100,000 new Red Seal skilled trades workers by 2030-31, aligned to Canada’s housing, infrastructure, and defence needs.   ● Expanding training capacity to deliver results at scale Modernizing and increasing apprenticeship and Red Seal training capacity, working with unions, employers, provinces and territories, and national institutions to shorten timelines and improve outcomes.   ● Removing financial barriers during apprenticeship training Introduce a new and redesigned Apprenticeship Grant that will provide apprentices with a weekly income top-up of $400 per week while they are attending mandatory in-class technical training for a total payment of up to $16,000 per apprentice, paid in addition to Employment Insurance.   ● Making education more affordable Extend for the 2026-27 academic year the increases to Canada Student Grants and interest-free Canada Student Loans—571,000 students are expected to benefit from the increase to non-repayable grants, and 422,000 students could benefit from the weekly loan limit increase.   ● Helping tradespeople go where the work is Enhancing the Labour Mobility Deduction will make it more affordable for skilled workers to travel to where jobs are available.   ● Encouraging shared ownership Making the Employee Ownership Trust tax exemption permanent will help more workers share in the success of the businesses they help build.

 

 

 

 

 

Making Life More Affordable for Canadians   Finding a place to live shouldn’t feel out of reach. The Spring Economic Update 2026 builds on Build Canada Homes with a plan to increase supply, lower costs, and help more Canadians find a safe, affordable home.   We’re taking action to build more homes, faster and smarter:   ● Cutting red tape to build homes faster Streamlining rules and modernising building codes will make it easier to construct new homes, including factory-built and modular housing.   ● Supporting innovation in construction Investing in new building technologies will help reduce costs and speed up construction.   ● Accelerating over $7 billion in low-cost financing to the Canada Mortgage and Housing Corporation More affordable financing will help builders move projects forward sooner—getting rental homes on the market faster.   ● Helping those most in need Extending support for people experiencing homelessness and ensuring survivors of gender-based violence have access to safe housing.   ● Boosting housing supply across Canada Through the Improving Housing Supply Act, $1.7 billion will go to provinces and territories to remove barriers and accelerate homebuilding, including reducing development fees and levies on new home construction.   ● Improving cash flows for home buyers Extending the grace period during which homeowners are not required to start repaying their Home Buyers’ Plan withdrawals from their Registered Retirement Savings Plan.   ● Reducing the contribution rate of the base Canada Pension Plan With the unanimous support of provinces and territories.   ● Making it easier to access the Disability Tax Credit Streamlining the application process for individuals with certain long-lasting medical conditions.

 

 

 

 

An Economy Built by Canadians

Budget 2025 is translating our vision into real action through major projects, less red tape, and generational infrastructure investments that move goods to market. The Spring Economic Update 2026 builds on this momentum with strategic investments that support productivity, growth, and competitiveness.

 

 

 

 

 

 

 

 

First Announced in Budget 2025
Trade Diversification and Infrastructure Strategies
		To ensure Canadian businesses can expand and double our exports to non-U.S. markets over the next decade, we are providing direct support to exporters, opening access to new markets, and modernising trade-enabling transportation systems and infrastructure.    In order to support trade diversification, the government is examining options to strengthen Canada’s supply chains—backed by signing 20 new deals on four continents.
Critical Minerals Strategy
		To grow Canada’s critical minerals industry, we are promoting domestic production and processing of critical minerals, safeguarding critical minerals value chains for our economic sovereignty, and partnering with Indigenous groups, domestic stakeholders and international allies. Canada has a broad suite of financing tools in place to support this strategically important sector, and initiatives under the Critical Minerals Strategy, including dozens of new partnerships and investments mobilising $18.5 billion in projects across the country – with the Canada-led G7 Critical Minerals Production Alliance. The government has referred five critical minerals projects to the Major Projects Office as part of the two waves of nation building project announcements, such as Nouveau Monde Graphite’s Matawinie Mine in Québec and the McIlvenna Bay Foran Copper Mine Project in Saskatchewan.
Defence Industrial Strategy
		To build Canada’s defence manufacturing and technology base, we are prioritising Canadian suppliers and materials in defence procurement, investing in Canadian defence innovation and commercialisation, and streamlining procurement.    We are positioning Canadian industry to take advantage of the government’s generational investments in defence, creating significant economic benefits for years to come—including 125,000 high-paying careers and support an estimated $180 billion total direct investment in in defence procurement by 2035. This will strengthen military supply chains, create good careers at home, and equip the Canadian Armed Forces with the capabilities they need to protect Canada and our Allies.
Since Budget 2025
Automotive Strategy
		To strengthen Canada’s auto manufacturing sector and protect over 500,000 workers, we are boosting investment, strengthening our climate goals, making electric vehicles more affordable and reliable, and protecting Canadian auto workers.    In response to persisting and unjustified U.S. tariffs on Canadian-made vehicles, we will maintain our reciprocal counter-tariffs and explore ways to leverage Canada’s automotive duty remission framework to reinforce domestic production, attract new investment and enhance the sector’s long-term competitiveness. We will also seek ways to attract new investment, including by leveraging the recent arrangement on electric vehicles with China.
Nature Strategy
		To build the clean and competitive economy of tomorrow, we are making significant investments through the Nature Strategy to help conserve 30 per cent of Canada’s lands and waters by 2030, ensure our industrial strategies complement our conservation efforts, and advance actions to value and mobilise capital for nature.

 

 

 

 

 

Building Stronger and Safer Communities

 

 

Empowering Canadians   Strong communities are the foundation of a strong Canada. The Spring Economic Update 2026 invests in the services and supports that keep communities safe, welcoming, and resilient—so Canadians can stay informed, access essential services delivered in both official languages, and thrive where they live.   Key actions include:   ● Supporting trusted, independent journalism Extending the Canadian Journalism Labour Tax Credit to help sustain high-quality local news and keep Canadians informed.   ● Investing in Indigenous communities Providing significant funding for essential services, including health benefits and culturally relevant education, to support stronger, healthier communities.   ● Investing in sport—from playground to podium Investing $755 million to expand access to sport, creating opportunities for Canadians to build meaningful relationships within their communities, making full use of existing and new infrastructure, and to support Canada’s world class athletes who inspire pride and unity, as we celebrate their accomplishments as a nation.   ● Protecting coastal livelihoods Investing nearly $1 billion to repair and maintain small craft harbours—supporting jobs, local economies, and the future of coastal communities.   ● Making it easier to access the Disability Tax Credit Streamlining the application process for individuals with certain long-lasting medical conditions and expanding the list of medical practitioners who can certify eligibility for the Disability Tax Credit will help ensure that Canadians with severe disabilities have access to the supports they need, including under the Canada Disability Benefit.

 

 

 

 

Protecting Communities   Too many Canadians—especially seniors and vulnerable people—are being targeted by scams and financial crime. The Spring Economic Update 2026 takes stronger action to protect people, crack down on criminals, and keep Canadians’ money safe:   ● Establish the Financial Crimes Agency as a best-in-class law enforcement agency with the personnel, resources, mandate, and legislative tools needed to tackle sophisticated financial crimes and recover illicit proceeds.   ● Protect Canadians by cracking down on the criminal abuse of money services businesses for money laundering, terrorist financing, sanctions evasion, and fraud through stronger regulations, new enforcement powers, and a ban on crypto ATMs.   ● Advance the National Anti-Fraud Strategy, with a public consultation launched in March 2026, by seeking feedback on the introduction of a multi-sector anti-fraud framework across the financial and telecommunications sectors, and digital platforms, alongside measures to strengthen public awareness of fraud and support law enforcement efforts to combat fraud.   ● Help keep communities safe and inclusive Investing in the programs and services that ensure Canadians feel safe, supported, and able to fully participate in community life.

Build in Canada. Invest in Canada. Choose Canada. Buy Canadian.

Because what we build belongs to you,

your children, and your country.

 

 

 

 

Economic and Fiscal Overview

A Resilient Economy Supporting Improved Fiscal Outcomes

The global economy is more than a year into a profound rupture. Economic security, industrial policy, and geopolitical competition are increasingly shaping investment, trade, and financial decisions. The recent conflict in the Middle East—which has disrupted key shipping routes and damaged energy infrastructure—has pushed energy prices higher, underscoring the fragility of global supply chains, and adding to already elevated uncertainty.

Despite this environment, Canada’s economy continued to expand, growing by 1.7 per cent in 2025. The economy avoided a recession and domestic activity remained solid, even as tariff increases and trade tensions weighed on activity. North American supply chains withstood disruptions more effectively than expected, with the Canada-U.S.-Mexico Agreement (CUSMA) protecting approximately 85 per cent of Canadian goods exports from recent U.S. measures.

Businesses and workers have shown remarkable resilience in the face of significant uncertainty. Business sentiment has recovered and firms are diversifying suppliers and markets. Canada also continues to attract significant global capital—leading the G7 in per capita direct investment inflows—and the Statistics Canada survey of planned capital expenditures for 2026 indicates that businesses plan to step up capital spending this year. Reflecting this adaptability, the International Monetary Fund (IMF) expects Canada to post the second-fastest growth in the G7 over 2026 and 2027 (Chart 1).

 

 

 

Labour market conditions have remained resilient. Since the start of 2025, Canada has added nearly three times as many jobs per capita (3.4 per 1,000 of population) as the U.S. (1.2 per 1,000). The majority of those jobs have been in the private sector. The unemployment rate peaked in September 2025 at 7.1 per cent, before falling to 6.7 per cent as of March—below private sector expectations at the time of Budget 2025. Wage growth has now outpaced inflation for more than three consecutive years, supporting continued gains in real incomes.

From a fiscal perspective, economic resilience, bolstered by government policies to respond to immediate challenges through temporary supports, is delivering an $11.5 billion improvement in the projected 2025–26 budgetary balance (Chart 2). This strength carries into future years, improving the budgetary balance, relative to Budget 2025, by an average of $10.7 billion per year from 2026-27 to 2029-30 before new measures. The government is deploying this fiscal uplift to improve affordability and raise Canadians’ standard of living through targeted and responsible policy measures, particularly in the areas of fuel, food, and housing affordability.

 

 

 

 

 

At the same time, U.S. trade actions have imposed economic costs and continue to reshape the Canadian economy. While goods exports have begun to recover and trade diversification efforts continue to advance, the impact of sustained U.S. trade measures could be long-lasting. In addition, the conflict in the Middle East and an adverse oil supply shock translating into higher oil prices have mixed effects for Canada’s economy: supporting energy incomes and government revenues, while raising costs for households, businesses, and governments, and adding to near-term uncertainty. Overall, private sector forecasters expect real GDP growth of 1.1 per cent in 2026 and 1.9 per cent in 2027, marginally lower compared to projections in Budget 2025.

Against this backdrop, continued momentum in implementing Budget 2025 initiatives to build economic strength and resilience remains essential—not only to shore up strength today, but to address deeper structural challenges and build resilience for tomorrow.

Global Context

The Middle East Conflict Will Slow Global Growth

The conflict in the Middle East is adding to an already fragile global economic environment. While the magnitude of the impact will depend on how long these disruptions persist, the conflict has raised uncertainty and heightened risks to global growth and inflation. These developments are occurring at a time when global trade and investment are already adjusting to a more fragmented and uncertain environment.

The region plays a critical role in global energy supply and maritime trade. Tanker traffic through the Strait of Hormuz—a critical route carrying about 20 per cent of global oil and liquefied natural gas shipments—has been severely disrupted. Along with damage to some energy infrastructure and concerns about further damage or production shut-ins, this has pushed crude oil and natural gas prices higher and increased volatility across energy markets. Beyond crude oil and natural gas, other products most exposed to disrupted shipping include refined fuels, petrochemical feedstocks, and fertilizer inputs.

Commodity prices have risen, driven in large part by higher oil prices. West Texas Intermediate (WTI) crude oil prices have become extremely volatile, with large intraday swings as markets have repeatedly repriced oil risk in response to rapidly changing signals on military escalation, ceasefire prospects, and the status of shipping through the Strait of Hormuz (Chart 3). Since the conflict began, WTI has traded in an unusually wide range, swinging between US$80 per barrel and near US$120 within weeks. As of April 22^nd, it was trading close to US$90—still up over 30 per cent from roughly US$67 prior to the conflict (Chart 4).

 

 

 

 

Limited capacity to re-route exports has led some Gulf producers to curtail production, while attacks on regional infrastructure have amplified market uncertainty. Current oil futures curves point to prices easing over the second half of 2026 and reaching about US$75 by year-end (Chart 4) as crude oil exports through the Strait of Hormuz gradually resume. As a result, oil prices are still expected to average about US$80 for the year as a whole, roughly US$15 higher than expected in Budget 2025. While longer-term price expectations remain more anchored, near-term oil pricing continues to reflect a substantial geopolitical risk premium that is likely to persist until shipping flows normalise and uncertainty is resolved.

 

 

 

 

Spillovers from transportation bottlenecks are also evident in other commodity markets: aluminum and fertilizer prices have increased. Reassuringly, despite some upside pressure from higher fertilizer costs linked to supply disruptions in the Middle East, global food commodity prices have increased only modestly so far. This largely reflects strong global inventories, continued export flows from major producers, and limited near-term pass-through from higher fertilizer and fuel costs. However, if energy and input prices remain elevated for a prolonged period or shipping disruptions intensify, cost increases for businesses could be passed along supplychains.

Financial conditions have tightened modestly from previously supportive levels due to the conflict in the Middle East. Bond yields have risen as investors reassess inflation and interest-rate risks, and equity markets have come under some pressure, particularly in countries and sectors more exposed to higher energy prices. These developments build on higher long-term interest rates across advanced economies, reflecting rising term premia amid elevated borrowing needs, higher defence spending, and ongoing monetary policy adjustments.

After weakening for much of 2025, the U.S. dollar strengthened against most currencies globally as the conflict in the Middle East unfolded and investors sought to de-risk portfolios. The Canadian dollar weakened slightly against the U.S. dollar during this period, though it has appreciated against other currencies, benefitting from higher commodity prices. The U.S. dollar has since pared most of those gains, as the conflict de-escalated.

Global Growth Resilient Amid Geopolitical and Trade Pressures

The conflict in the Middle East is a new source of uncertainty, compounding existing risks from U.S. tariffs and trade tensions. The global trading system has undergone lasting change, with U.S. tariffs expected to remain elevated (Chart 5). Tariffs and ongoing trade policy uncertainty continue to weigh on global economic activity and put upward pressure on prices. Evidence indicates that U.S. businesses and consumers are absorbing most of the tariff costs, although the pass-through to inflation appears to have peaked.

 

 

 

 

 

 

Despite these pressures, global GDP growth has remained relatively firm, supported by strong artificial intelligence (AI)-related investment, continued fiscal support, and resilient labour markets. Most major central banks eased monetary policy in 2025, though the pace of cuts slowed as economic activity remained firmer than expected and inflation moderated only gradually.

IMF analysis in its latest World Economic Outlook (April 2026) suggests that the global energy shock associated with the Middle East conflict is already pushing inflation higher across major economies and will weigh on global growth. Under a relatively short-lived conflict, global GDP growth is expected to ease to 3.1 per cent in 2026, whereas it would have been projected at 3.4 per cent absent the conflict. Growth is projected to edge up to 3.2 per cent in 2027, as the dampening effects of higher energy costs offset tailwinds from technology investment, lower U.S. tariff rates, and continued fiscal support.

Risks remain significant and skewed to the downside. U.S. growth has become increasingly concentrated in a narrow set of technology-driven sectors. If expected productivity gains from recent investment fail to materialise, a repricing of related equities could amplify downside risks through tighter financial conditions and weaker confidence. More broadly, persistent disruptions in the Middle East could further elevate energy and commodity prices, add to inflation, weigh on growth, and increase financial market volatility. The IMF estimates that global GDP growth in 2026 could be reduced to 2.5 per cent if higher oil prices were to persist into 2027, or even to 2 per cent—approaching a global recession—under a severe scenario where price pressures spill over beyond energy markets and broaden overall cost pressures.

Canada’s Economy Amid Higher Oil Prices

As a net energy exporter with limited exposure to trade through the Strait of Hormuz, the Canadian economy is more insulated from the impacts of the conflict than other countries. Higher crude oil prices improve Canada’s terms of trade—the ratio of export prices to import prices—raising energy-sector profits and potentially supporting investment and employment, while also increasing government revenues (see the Economic Scenario Analysis section and the box entitled “Economic and Fiscal Impact Sensitivity to Higher Oil Prices” in Annex 1). While higher oil prices have historically been associated with increased investment in the energy sector, temporary supply-driven price increases are less likely to generate a sustained investment response, particularly when uncertainty is elevated.

At the same time, the net impact on real GDP is expected to be uneven across sectors and regions. Higher energy prices create hardship for many households, reducing purchasing power, and raising costs for businesses. Retail gasoline and diesel prices, for example, had risen by about 35 per cent and 43 per cent, respectively, at their peaks in early April. To help Canadians and businesses manage these pressures, the government introduced a temporary

 

 

 

 

suspension of the federal fuel excise tax on gasoline, diesel, and aviation fuels. Following this implementation on April 20^th, retail gasoline prices declined by roughly 12 cents per litre and diesel prices by about 16 cents per litre, even as global oil prices continue to fluctuate. By contrast, gasoline prices in the U.S. were unchanged over the same period. These declines indicate that the savings have been passed through to consumers.

Combined with tighter global financial conditions and fragile confidence, fuel price pressures could weigh on domestic demand if the conflict persists. While the impact from higher oil prices on economic activity in Canada is expected to be modest, elevated uncertainty stemming from the conflict, alongside an economy already operating below its productivity capacity, points to risks that are tilted to the downside.

Consumer Price Index (CPI) inflation picked up in March, reflecting higher gasoline prices. If the oil price increase proves temporary, as expected by markets, inflation could return to the 2 per cent target by the end of this year. If oil prices increase further and persist at high levels, higher energy costs could spill into other goods, prolonging affordability challenges for everyday essentials like food, where inflation continues to be elevated. With the economy operating below its capacity and core inflation easing, spillovers to other prices could be more contained. Nonetheless, continued price pressures across everyday essentials underscore the importance of the government’s multi-pronged approach to help Canadians manage cost pressures, including through targeted relief to low- and modest-income households.

To help support prudent planning amid uncertainty, the Spring Economic Update 2026 illustrates the economic implications of two scenarios relative to the March 2026 private sector survey results. A more optimistic scenario assumes a stronger investment outlook, as higher oil prices drive up national income and ongoing geopolitical instability reinforces global demand for Canadian energy, reflecting Canada’s role as a stable and reliable supplier to global markets. A more pessimistic scenario assumes that damage to critical energy infrastructure and broader supply disruptions lead to higher global inflation, tighter global financial conditions and lower global demand, leading to more cost pressures and a weaker growth outlook in Canada. Further details of these scenarios can be found in the Economic Scenario Analysis section of this Overview.

What This Means for You

The global economy is becoming more uncertain, but Canada is starting from a position of strength. Events like new tariffs, trade tensions and conflicts abroad continue to affect costs for households and businesses, as well as economic activity at home. But Canada is well positioned to manage these pressures, thanks to our robust economy and a clear growth strategy—focused on driving investment, boosting productivity, strengthening domestic industries, and expanding access to global markets. The government is focused on helping Canadians navigate this uncertainty and the effects on affordability while building a stronger, more resilient economy for the future.

Canadian Economic Context

Canada’s Economy Outperforming in the Face of Tariffs

The Canadian economy has shown resilience in the face of significant trade tensions and geopolitical uncertainty. Domestic demand remained resilient and the economy avoided the recession many had predicted in early 2025. Spillovers were limited as consumer spending held up, job losses were contained, while global activity and new transportation infrastructure supported Canada’s natural resource sectors. At the same time, Canada continues to enjoy the lowest average tariff rate among all major U.S. partners, at 5.2 per cent. While activity softened over the course of 2025, a recession was avoided and growth is expected to pick up in 2026 (Chart 6). Notably, Canada’s growth in 2025 was still the second highest of the G7.

U.S. tariffs contributed to declines in Canadian goods exports, a pullback in business investment, and job losses in tariff-exposed sectors. These pressures contributed to volatility in quarterly real GDP. Growth swung from a 2.4 per cent (annualised) gain in the third quarter to a 0.6 per cent contraction in the fourth. The fourth-quarter decline masks firmer domestic momentum, supported by solid consumer spending and renewed business investment.

 

 

 

 

Goods exports remain below pre-tariff levels but are gradually recovering as firms adjust and energy export capacity expands (see Canadian Exports Are Recovering section and boxes). Household spending held up in 2025, with consumption rising 2.3 per cent—up slightly from the pace of the last two years. Trade diversification efforts are bearing fruit, with non-U.S. goods exports up by roughly 36 per cent since 2024.

Overall, real GDP grew 1.7 per cent in 2025, just below the pace of the previous two years, and the unemployment rate fell to 6.7 per cent in March, below private sector expectations in Budget 2025 (Chart 7). On a per capita basis, real GDP grew by 0.6 per cent in 2025 after declining in both 2023 and 2024. Trade policy uncertainty continues to weigh on exports and business investment. Past interest rate cuts and ongoing infrastructure investment are supporting domestic demand, with private sector economists expecting growth to improve and reach about 2 per cent by year-end.

 

 

 

Canadian Exports Are Recovering

The shift in the global trade landscape and higher tariffs have left Canadian real exports about 2 per cent below their 2024 level. However, the impact has been less severe than initially expected, supported in part by firms’ use of CUSMA exemptions and early diversification efforts (see box).

As firms adapt, exports have begun to stabilise. Real goods exports rose about 6.5 per cent (annualised) in the second half of 2025, driven mainly by gains in non-tariff-exposed sectors such as energy and consumer goods. Early signs of export diversification to non-U.S. destinations are also rising and Canada is making progress towards doubling its total non-U.S. exports (Chart 8).

Trade adjustment remains uneven. Exports in tariff-exposed sectors declined in the fourth quarter after briefly stabilising, reflecting continued pressures. Shipments have been more resilient where higher pricing, domestic sales, or sales to non-U.S. markets have helped offset tariff impacts. The government has introduced a suite of targeted measures, which are helping to mitigate costs for many affected firms.

Infrastructure investments are also strengthening export capacity (see box).

 

 

 

 

 

 

Canadian Businesses Are Adapting to a Changing Trade Environment   Canadian goods exporters experienced a significant drop in demand following the imposition of U.S. tariffs, and adjustments will take time. Early evidence, however, indicates that firms are actively repositioning.   ● Sales to non-U.S. markets are rising (Chart 8). In Export Development Canada’s March 2026 survey, 65 per cent of exporters reported plans to enter new markets in the next two years.   ● Supply chains are being reconfigured. Many firms are sourcing inputs from non-U.S. markets to avoid the effect of tariffs, leading to higher imports from non-U.S. suppliers (Chart 9).   ● Technology adoption is accelerating. Statistics Canada’s Canadian Survey on Business Conditions shows a growing share of manufacturers adopting AI and other advanced technologies to improve efficiency.   Firms are also adjusting pricing, sourcing, and production to mitigate tariff-related cost pressures. Early signs of adaptation are visible in tariff-exposed sectors: steel producers have increased domestic sales, while aluminum producers have benefited from stronger pricing and initial success diversifying beyond the United States.   More broadly, signs of diversification are emerging. While part of the recent strength in exports reflects strong gold exports, where surging global demand has lifted both prices and volumes, gains are also visible across several sectors, including aircraft and consumer goods and electronics (Chart 10).   Some of the expansion into new markets reflects areas where Canada is already globally competitive—such as some manufactured food and beverages, and non-automobile transportation equipment. Diversification remains more limited in the most tariff-exposed industries, including steel, softwood lumber, and motor vehicles and parts, which are deeply embedded in integrated North American production networks. In these sectors, Buy Canadian policies continue to be vital in sustaining good jobs.   Budget 2025 signaled the government’s intention to double combined goods and services exports to non-U.S. markets over the next decade. Progress towards this objective is underway, with overseas exports increasing along the implied path required to reach the 2035 target: non-U.S. goods and services exports increased by $33 billion in 2025 compared to 2024, on the way to meet the target of generating $300 billion more in overseas trade in a decade. The new Trade Diversification Strategy—backed by signing 20 new deals on four continents—is reinforcing this momentum by providing targeted, practical support for exporters, as well as generational investments in infrastructure that improve the reliability and competitiveness of moving goods to global markets. These efforts build on an existing suite of programming designed to help exporters diversify, led by Export Development Canada, which provides financing, insurance, and advisory services—particularly for small and medium-sized exporters.

 

 

 

 

Chart 9 – Goods Imports From Non-U.S. Chart 10 – Goods Exports to Non-U.S. Markets Markets Are Up Are Up Imports in 2025 Relative to 2024 Exports (Excluding Gold) Relative to 2024 C$, billions U.S. 1.0 Latin America Non-U.S. 0.5 Rest of World 0.0 ASEAN -0.5 E.U. -1.0 -1.5 China -2.0 U.S. -2.5 Metals & Energy Other Electr. & Agri. & Motor Prod. Cons. Inter. Vehicles -20 -10 0 10 20 Goods Food Mfg. C$, billions Notes: Data are on a nominal customs basis. Last data point is Notes: Abbreviated categories include metal ores and non-metallic 2025 (annual). ASEAN = Association of Southeast Asian Nations. minerals; metal and non-metallic mineral products; farm, fishing and Sources: Statistics Canada; Department of Finance Canada intermediate food manufacturing; and electronics and consumer goods. calculations. Data are on a nominal customs basis and averaged over three months to smooth volatility. Last data point is February 2026. Sources: Statistics Canada; Department of Finance Canada calculations.

 

 

 

 

New Transportation Capacity Paves Way to New Markets   Expanded oil transportation infrastructure—particularly the Trans Mountain Expansion Project—has significantly improved Canada’s access to global markets. Fully operational since 2024, the project has materially increased export capacity to tidewater in western Canada.   By connecting landlocked production to seaborne markets, the expansion has helped ease bottlenecks, diversify export destinations, reduce price discounts on Canadian crude, and strengthen Canada’s position in global energy trade. As a result, crude exports to non-U.S. markets—especially in Asia—have accelerated in recent years (Chart 11).   Prior to the expansion, less than 3 per cent of Canada’s crude exports went to markets outside the United States; that share has now risen to roughly 10 per cent. Looking ahead, additional projects could expand total takeaway capacity by up to 12 per cent.         Liquefied natural gas (LNG) projects aim to capitalise on Western Canada’s abundant, low-cost natural gas resources by exporting LNG to global markets where demand is high and prices are more attractive. Canada’s first large-scale export terminal, LNG Canada Phase 1, began exporting in June 2025 in Kitimat, B.C. Since that time, data published by the Canada Energy Regulator show that LNG exports have grown rapidly, rising from negligible levels in 2024 to 7.5 per cent of total natural gas exports. This growth has supported economic activity and helped offset weaker export performance in other areas.   In addition, eleven other LNG projects are at various stages of development across the country, including seven projects in British Columbia. Of these, two are under construction, three have secured regulatory approvals and are advancing toward project milestones, and two are in the regulatory review process. Combined with LNG Canada Phase 1, British Columbia LNG projects represent potential capital investments of over $150 billion and a potential production capacity of approximately 50 million tonnes per annum of LNG by the early 2030s. Projects in other regions account for more than $50 billion in potential investments.

 

 

 

 

Business Confidence Has Recovered and Investment Is Rising

Real business investment remained subdued in 2025 amid weak export demand and elevated uncertainty. This is weighing on productive capacity and potential growth. Recent data, however, suggest conditions may be stabilising. Investment rose 2.6 per cent in the fourth quarter after three consecutive declines. The gain was driven by a rebound in machinery and equipment, particularly computers and software. Confidence has improved to around 2024 levels, and firms plan to increase non-residential investment by 2.8 per cent in 2026 (nominal), following a 0.5 per cent decline in 2025 (Chart 12). These developments indicate an uptick in investment and that the economy entered 2026 with firmer momentum.

Improved sentiment is supported by Canada’s relative U.S. tariff advantage, targeted federal incentives, and rising public investment in trade- and transportation-enabling infrastructure. Together, these factors are helping set the stage for increased private investment and stronger supply-chain resilience.

Confidence in Canada as an investment destination continues to be strong. The 2025 Kearney FDI (foreign direct investment) Confidence Index ranked Canada second among 25 global markets, and Canada led the G7 in per capita direct investment inflows in 2025 (Chart 13).

 

 

 

The Labour Market Has Proven Resilient

Canada’s labour market softened following rising trade tensions and the introduction of higher tariffs last year, with hiring remaining subdued through much of 2025. Even so, the labour market withstood the shock better than expected. Employment growth resumed in the second half of the year, signalling that conditions are stabilising.

Despite some recent moderation, Canada is well ahead of the U.S. in job creation per capita and the core-aged employment rate remains nearly three percentage points higher than in the U.S. Since the start of 2025, more jobs have been added in Canada on a per-capita basis (3.4 per 1,000 versus 1.2 per 1,000 in the U.S.). Most of those jobs were in the private sector (Chart 14). Challenges in tariff-exposed sectors have led to employment losses (Chart 15), and business surveys still point to subdued hiring intentions. Demand remains particularly soft for entry-level jobs, a headwind for both youth and newcomers.

 

 

 

 

 

Even so, the unemployment rate has fallen to 6.7 per cent, down from a peak of 7.1 per cent last summer and below private sector expectations in Budget 2025. Wage growth has now outpaced inflation for over three years, resulting in an annual increase of 1.6 per cent in real wages on average since 2023 (Chart 16), nearly double the pace recorded in the decade prior to the pandemic. Cumulatively, real wage growth since 2019 has been almost twice as strong in Canada as in the United States. Sustained productivity growth will be important to support stronger and more durable gains in real incomes over time.

 

 

 

 

 

 

Slower Population Growth Is Easing Labour Market Pressures

Following a period of strong gains averaging over 45,000 jobs per month late in 2025, employment has levelled off over the past three months. This comes alongside a deceleration in population growth, which has reduced the number of new jobs needed to keep unemployment stable.

This marks a clear shift from 2022–2024, when rapid population inflows pushed labour supply growth beyond what the economy could readily absorb. Under the 2026–2028 Immigration Levels Plan, population growth is expected to remain at more sustainable levels, supporting a more balanced labour market—responding to local needs and the ability for communities to absorb new immigrants.

Job growth should resume in 2026, but gains will likely be modest, with demand for workers expected to improve gradually. Combined with slower growth in the working-age population, this is expected to support a gradual easing in the unemployment rate in the second half of the year.

Labour Market Holds Firm Despite Moderate Challenges

 

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Youth unemployment remains elevated and has only slightly declined from its recent peak of 14.6 per cent in September 2025 to 13.8 per cent in March. Policy measures by the government have supported improved outcomes for young people entering the labour market.

 

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Job losses remain contained. Initial Employment Insurance claims are within historical norms, and many displaced workers are finding new employment.

 

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Labour force participation declined over the last year but remains an area of strength. Canada continues to lead the G7 with a 64.9 per cent participation rate, well above the U.S. rate of 61.9 per cent, and it is expected to rise further as conditions improve.

 

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Women’s labour force participation is historically strong. The participation of women aged 25 to 54 reached 85 per cent in 2025—nearly seven points higher than in the U.S.—with youth and newcomer participation also comparatively strong.

Housing Affordability Is Improving

Housing markets are undergoing a gradual rebalancing. Affordability pressures, softer sentiment, additional supply coming to the market, and slower population growth are driving a broad-based adjustment.

Together, these developments are putting downward pressure on home prices—now about 20 per cent below recent peaks—and on rents, which are down roughly 9 per cent nationally. These adjustments are contributing to improvements in housing affordability across many markets, and have helped lift the national rental vacancy rate to 3.1 per cent in 2025 from a historical low of 1.5 per cent in 2023.

At the same time, this rebalancing has been accompanied by weaker homebuilding activity in some markets, as developers respond to higher costs and softer near-term demand. If sustained, this could pose risks to future housing supply. Against this backdrop, the government remains focused on unlocking new housing supply and securing durable affordability gains.

Recent initiatives—including the launch of Build Canada Homes, the introduction of the Improving Housing Supply Act, and measures in the Spring Economic Update 2026—underscore the government’s continued efforts to unlock new housing supply, improve market responsiveness, and ensure that recent affordability improvements are sustained over time.

 

 

 

 

Housing Activity Has Moderated in Several Markets

While home sales remain subdued nationally, this adjustment is helping to relieve affordability pressures, particularly for prospective buyers who had been priced out in recent years. Moderation has been most evident in markets where post-pandemic price increases were most pronounced and affordability challenges most acute, notably Toronto and Vancouver.

 

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The sales-to-new-listings ratio remains below its historical average, with higher inventories improving choices and negotiating conditions for buyers.

 

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Conditions remain softest in Ontario and British Columbia, where existing home sales are around 30 per cent below their 10-year averages. In these markets, price corrections—particularly in condominium segments—are helping realign prices with underlying demand, following a period of rapid investor-driven expansion. Condo markets show particular weakness, weighing on new home sales and project launches.

 

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Markets in Québec, the Prairies, and Atlantic Canada have been more resilient, supported by better affordability, though cooling momentum is increasingly evident as national conditions normalise.

 

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National home prices have declined by about 5 per cent over the past year (Chart 17). Combined with continued growth in real household incomes, these price adjustments are improving purchasing power and easing entry barriers for first-time buyers.

A Surge in Purpose-Built Rentals Is Expanding Supply

Overall construction activity has remained elevated by historical standards. Housing starts totaled 260,000 units in 2025—well above the 2000–2019 average of about 200,000—driven by record levels of purpose-built rental construction supported by federal measures.

Growing supply—combined with efforts to bring population growth back to more sustainable levels—is helping to narrow Canada’s housing supply gap and deliver meaningful improvements in affordability (see box). Since recent peaks, average home prices have declined by 20 per cent, national rents are nearly 9 per cent lower than their 2024 peak, and average monthly mortgage payments for homeowners have fallen by more than $1,200 in Toronto and Vancouver, almost $400 in Calgary, and over $200 in Halifax from peak levels. Together with continued gains in real household incomes, these developments are restoring purchasing power and easing access to housing for renters and first-time buyers.

The Department of Finance’s affordability metric, which measures monthly mortgage payments relative to median monthly wages, has improved to 60 per cent in early 2026, down from the September 2023 peak of 87 per cent, reflecting the combined effects of lower mortgage rates, declining home prices, and continued income growth. The ratio has now returned to around 2017 levels. Rental affordability has also strengthened: the share of disposable income required for rent by new tenants improved to 29 per cent, down from a peak of 34 per cent in October 2023 (Chart 18), with advertised rents now just under 30 per cent of renter gross income nationally—the first readings at or below that threshold in over six years.

At the same time, homeownership-oriented construction, including condos and ground-level homes, has moderated amid softer demand, high costs, and higher inventories. Leading indicators suggest that activity in these segments will continue to ease, with new home sales in several markets remaining below historical levels and contributing to builders delaying and cancelling projects. This adjustment has weighed on construction employment, resulting in job losses in the skilled trades and construction, with residential construction employment down by 6.2 per cent and 2.6 per cent in Ontario and British Columbia, respectively, in 2025. These workers are essential for supercharging homebuilding across the country. Maintaining capacity in the construction sector remains essential to scaling up housing supply and securing durable affordability gains nationwide—a core policy priority.

 

 

 

 

 

Government Is Acting to Unlock New Housing Supply

Progress is being made, home prices have declined and asking rents have eased over the past two years, down almost 9 per cent since their most recent peak (see box), but far too many Canadians continue to struggle to find homes they can afford, and the ongoing market adjustment poses a risk to future housing supply.

Solving Canada’s housing challenges requires immediate action to bring down costs, cut red tape, and build homes more quickly. That is why the government has introduced legislation to immediately provide $1.7 billion to provinces and territories to implement additional measures to unlock new housing supply, such as reducing development fees or levies on new home construction. The government has also announced a new partnership with Ontario to reduce taxes and fees for a home in Ontario by up to $200,000.

Housing activity is expected to stabilise as uncertainty recedes, the economy strengthens, affordability improves, and the government’s actions to accelerate the pace of homebuilding take effect. This should allow for a gradual recovery in existing and new home sales and create a more favourable environment for homeownership-focused construction.

 

Federal Actions Are Building Momentum on Housing Affordability   Housing affordability remains a major challenge, but momentum is building. Housing supply is expanding and population growth is returning to more sustainable levels, easing supply-demand pressures that have driven up housing costs in recent years.   Housing supply has expanded at a solid pace, driven by strong purpose-built rental construction. Rental starts reached about 120,000 units in 2025—roughly five times the 2000–2019 average. Federal incentives and financing support have contributed to this strength, with CMHC’s multi-unit mortgage loan insurance programs supporting nearly 90 per cent of rental apartment starts in 2024.   At the same time, the 2026–2028 Immigration Levels Plan is helping return population to more sustainable levels, with growth slowing from a peak of 3.2 per cent in the second quarter of 2024 to -0.2 per cent at the end of 2025 and expected to remain subdued over the next two years. This is allowing new supply to catch up with underlying demographic demand (Chart 19).

 

 

 

 

As a result, the housing supply gap is beginning to narrow, particularly in rental markets. Vacancy rates have risen above historical averages in several cities, and asking rents have declined by almost 9 per cent since peaking in late 2024, including declines of $210 in Toronto and $320 in Vancouver (Chart 20).   Home buyers have also seen some relief. Lower mortgage rates, combined with price declines in several markets, have resulted in improvements in the Bank of Canada’s Housing Affordability Index from a peak of 54.5 per cent to 42.7 per cent. Monthly mortgage payments on an average-priced home for prospective home buyers have fallen by more than $1,200 in Toronto and Vancouver since late 2023.   The government’s approach focuses on expanding Canada’s housing stock by reducing building and financing costs, improving productivity in the homebuilding sector, and boosting the supply of affordable housing. Federal measures, estimated at over $140 billion in spending and foregone revenues over the next five years, cover the entire housing continuum, from homelessness to market-rate housing.   Structural reforms—paired with more sustainable population growth and targeted support for first-time home buyers—have reduced and will continue to reduce the housing supply gap and improve affordability.

Inflation Remains Within the Target Range Despite Near-Term Volatility

Prior to the conflict in the Middle East, inflation had moved close to target. It averaged 2.1 per cent in 2025, lowered in part by the removal of the federal consumer carbon price last April, and slowed to 1.8 per cent in February. Inflation then rose to 2.4 per cent in March, reflecting higher energy prices. Even with this increase, inflation has remained within the Bank of Canada’s 1–3 per cent target range for 27 consecutive months (Chart 21). Measures of core inflation have eased since late last year and are now closer to 2 per cent.

Before March, energy prices were a drag on overall inflation, with prices down 9.3 per cent as of February, largely reflecting declining oil prices over 2025 and the ongoing effect from the removal of the consumer carbon price. In March, with the onset of the conflict, energy prices were up nearly 4 per cent year over year as gasoline prices soared. Indeed, retail gasoline prices had risen quickly—from a national average of $1.42 per litre at the end of February to $1.81 as of April 17^th, an increase of nearly 30 per cent seen across the country. Following the implementation of the temporary suspension of the federal fuel excise tax on April 20^th, gasoline prices decreased by 12 cents per litre on April 21^st, indicating pass-through of the tax measure.

 

 

 

 

 

Policy Measures Will Provide Relief from Fuel Price Pressures

To help ease the pressure from higher fuel prices, the government has announced a temporary suspension of the federal fuel excise tax on gasoline, diesel, and aviation fuels across Canada. Starting on April 20, 2026, this measure would be in place until and including September 7, 2026, and is expected to reduce Canadians’ bills at the gas station by up to 10 cents per litre on regular gasoline and up to 4 cents on diesel. This relief will also reduce operating costs for many businesses.

If the increase in oil prices is temporary, inflation is expected to return to the 2 per cent target by the end of the year. Other tariff-related cost pressures appear contained, and soft economic conditions could help limit the pass-through from higher energy prices. Underlying inflation dynamics had continued to improve heading into 2026, with the Bank of Canada’s preferred core measures at 2.3 per cent in March, while momentum of those measures pointed to subdued price pressures.

By contrast, a prolonged disruption of shipping through the Strait of Hormuz would extend cost pressures. Elevated crude oil prices would persist for longer, increasing the likelihood of spillovers to other prices, especially for energy-intensive goods and services. Pressures on global food prices would also intensify, reflecting higher fertilizer costs and given that natural gas from the Middle East is a key source of nitrogen-based fertilizers globally.

As inflation had stabilised faster in Canada than in most peer economies prior to the Middle East conflict, the Bank of Canada had lowered its policy rate by a cumulative 275 basis points since early 2024—more than the U.S. Federal Reserve (Chart 22). At 2.25 per cent, the policy rate was calibrated to support the soft landing underway. Bond yields have risen as investors re-assess inflation and interest rate risks stemming from the conflict, but Canada maintains its advantage over the U.S. on long-term rates (Chart 23). The Bank of Canada has noted in recent communications that there are downside and upside risks to the inflation outlook. The Canadian economy was evolving broadly as expected in its most recent forecast in January, but the conflict in the Middle East will also push inflation higher in the near term.

Food and Rental Inflation

Even as broad inflation measures improved, many Canadians continue to feel other cost pressures beyond fuel—especially for groceries and housing (see box).

Grocery inflation was 4.4 per cent year-over-year in March, reflecting temporary and structural global factors. A significant share of recent price pressures has been concentrated in a few items—beef, coffee, confectionery, and lettuce—which make up about 10 per cent of the grocery basket. Prices for these items were up 21 per cent year-over-year in January 2026 and have since begun to ease. Excluding these items, grocery inflation was 3.3 per cent in March.

Shelter inflation has slowed, reaching 1.7 per cent in March—remaining near its lowest level since 2021 and around its 2010–2019 average. Rent inflation, currently just above 4 per cent, largely reflects existing rents catching up to

 

 

 

 

earlier increases in market rents as tenancies turn over, and is expected to ease as population growth slows and new rental supply comes online.

Canadians are seeing material improvements in affordability across other parts of household expenditures. The cost of child care nationally has fallen by nearly 30 per cent between 2019 and 2025, while the cost of cellular services has halved over the same period.

To help address food affordability challenges, the government is developing a National Food Security Strategy to make it easier for Canadians to access affordable and nutritious food and to build Canada’s resilience and capacity to meet domestic needs. The government is also making groceries and other essentials more affordable for more than 12 million Canadians through the new Canada Groceries and Essentials Benefit.

 

 

 

Why Canadians Still Feel Their Budgets Are Strained—And What the Government Is Doing About It   Inflation has remained within the Bank of Canada’s target control range for more than two years, and wages have outpaced prices for over three years, improving purchasing power for many Canadians. Policy changes have also helped ease pressures on some everyday costs—such as gas through the removal of the consumer carbon price, child care, and cell phone bills (Chart 24). However, essential expenses—particularly groceries and housing—have risen sharply since 2019, and these higher price levels are straining household budgets even as inflation remains within the target control range.   High Price Levels Still Affect Household Budgets   Beyond the recent increase in gasoline prices, food inflation (groceries and food services) remains elevated at about 4 per cent—well below its pandemic-era peak but still high enough to strain budgets. Pressures are most acute for lower-income households, who devote a larger share of income to groceries (about 24 per cent versus roughly 8 per cent for other households) and have less ability to substitute toward lower-cost options.   While food prices are highly volatile, these pressures are not unique to Canada. G7 economies have experienced elevated food inflation due to global supply constraints and rising production costs (Chart 25). Higher agricultural commodity prices, elevated energy and fertilizer costs, weather-related crop disruptions, and the weaker Canadian dollar in late 2024 have all contributed to higher food prices. These pressures are amplified by Canada’s highly integrated food supply chain. About 30 per cent of Canada’s food supply is imported, rising to about 75 per cent for fresh produce, where prices tend to be more volatile and highly weather-dependent.

 

 

 

 

Housing costs also rose substantially during the post-pandemic rebound, especially rents. While shelter inflation has now fallen back to 1.7 per cent, close to historical norms for the first time in five years, many Canadians are still adjusting to earlier increases. Encouragingly, new asking rents have declined in major cities such as Toronto and Vancouver over the last two years, reflecting improving supply conditions and easing demand pressures.   Government Actions to Support Canadians   To help Canadians manage persistent cost pressures, the government is pursuing a three-pillar approach that combines immediate relief with longer-term structural reforms (for full details, see Chapter 2):   1.  Direct support for household budgets: The new Canada Groceries and Essentials Benefit will provide hundreds of dollars more in near-term relief to more than 12 million low- and modest-income Canadians, helping to offset the rise in essential living costs. Families with two children are also saving $800 per year on groceries with the permanent National School Food Program, and 22 million Canadians are getting a middle-class tax cut, with two-income families keeping up to $840 per year in their pockets.   2.  Reducing key cost pressures where government can influence prices: Federal actions are lowering or slowing price growth in areas where policy levers are strong—such as child care, cellular bills, gasoline costs, and parts of the food supply chain—by improving resilience, lowering production costs, and strengthening distribution systems.   3.  Addressing the structural drivers of affordability: Long-term measures focus on boosting productivity, expanding housing supply, and strengthening competition. These reforms aim to raise incomes over time and reduce the systemic cost pressures that have kept prices high. In the Canadian agricultural and food sector alone, up to $7 billion in new capital by 2030 is planned by Farm Credit Canada and more than 20 investment organisations. These investments will help to support innovation, which could help to lower food costs for Canadians. As announced in January, among other measures the government is also developing a National Food Security Strategy to strengthen domestic food production and improve access to affordable, nutritious food.   Together, these actions form a coherent affordability strategy: immediate help for those who need it most, targeted measures to lower everyday costs, and structural reforms to improve affordability over time.

 

 

 

 

What This Means for You

The economy has remained steady despite U.S. tariffs. Businesses are adapting, new markets are opening, and exports are recovering—supporting jobs and growth. At the same time, many households still feel cost-of-living pressures and some sectors remain vulnerable. Wages remain firm, but gasoline prices have increased sharply amid higher oil prices and essentials like housing and groceries are still expensive. Rents have started to ease in many areas as supply increases, while home prices have come down in some markets. The government is responding by supporting affected sectors, investing in housing to boost supply and affordability, and lowering costs for essentials like groceries and child care.

Canadian Economic Outlook

Growth Expected to Strengthen

The Department of Finance Canada regularly surveys private sector economists on their outlook for the Canadian economy (see Annex 1 for details).

In the early March 2026 survey, private sector economists expected current tariffs on Canada to remain in place over the near term. Forecasters did not anticipate a return to broadly open, low-tariff global trade. In addition, private sector economists expected trade uncertainty to remain elevated over this year and next, reflecting sectoral tariff threats and a likely complex review of CUSMA.

The conflict in the Middle East has created an additional shock to the Canadian economy, which was already adjusting to the impact of U.S. tariffs. In the early March survey, private sector economists incorporated the expected initial impacts of the conflict in the Middle East. They had increased their near-term assumptions for crude oil prices, resulting in higher CPI and GDP inflation for this year. Economists did not expect material impacts on real GDP or the unemployment rate, as they generally expected a short-lived conflict, with oil prices and inflation starting to normalise in the second half of the year. That said, the situation has continued to evolve and impacts remain highly uncertain.

Private sector forecasts point to a wide dispersion in the outlook for real and nominal GDP, underscoring elevated uncertainty around the outlook. This reflects differing assumptions, particularly regarding the path of oil prices and how trade tensions and higher energy costs are expected to transmit through the global and Canadian economy.

The range between the high and low real GDP forecasts is close to 2 per cent by the end of 2027, and suggests risks are tilted to the downside (Chart 26), reflecting concerns about weaker global demand, tighter financial conditions, and persistent uncertainty weighing on investment, exports, and household spending.

To further support prudent planning, the Department of Finance Canada has assessed a range of potential outcomes in the Economic Scenario Analysis section below.

Since Budget 2025, economic activity has shown volatility but, on average, performed in line with private sector expectations, while the labour market has stabilised. Following initial weakness from the onset of tariffs, real GDP growth surprised on the upside in the third quarter of 2025 before slightly declining in the fourth quarter.

The economy is expected to remain soft early in the year as the adjustment to the new trade environment continues. Improved confidence, supportive financial conditions, and public infrastructure investment should encourage firms to explore new markets and step up capital spending, supporting gains in exports and investment. As activity strengthens, the labour market is expected to improve, with solid wage growth supporting household consumption. Private sector forecasters expected real GDP growth to reach about 2 per cent by year-end (Chart 27).

 

 

 

 

 

Overall, private sector forecasters expected real GDP growth of 1.1 per cent in 2026 and 1.9 per cent in 2027—compared to the Budget 2025 outlook of 1.2 per cent and 2.0 per cent, respectively. According to the IMF, Canada’s performance is expected to remain strong internationally, with the second-fastest pace of growth in the G7 for the next two years.

GDP inflation was expected to average 2.8 per cent in 2026 and 1.8 per cent in 2027, compared with 1.8 per cent and 2.0 per cent in Budget 2025. As a result, the level of nominal GDP was projected to exceed the Budget 2025 outlook by $31 billion per year on average over 2025-2029, reflecting stronger-than-expected results in the second half of 2025 and a stronger near-term GDP inflation outlook resulting from higher oil prices (Chart 28). Despite this improvement, forecasters continue to expect a persistent drag on Canada’s productive capacity from weaker business investment and sectoral reallocation following the tariff measures. As a result, the level of real GDP is projected to remain 1.6 per cent below the pre-tariff 2024 Fall Economic Statement projection by 2029.

In the March survey, private sector economists expected:

 

●

WTI crude oil prices to ease from peaks of nearly US$100 per barrel at the onset of the Middle East conflict and to average US$80 per barrel in the second quarter of this year (US$15 per barrel above Budget 2025). The price of oil was expected to average US$73 per barrel in 2026 compared to the Budget 2025 forecast of US$65 per barrel. It was then expected to decline to US$66 per barrel in 2027, in line with Budget 2025.

 

●

CPI inflation to average 2.5 per cent in 2026 and 1.9 per cent in 2027 (compared to 2.0 per cent for both years in Budget 2025). Inflation was then expected to be at 2.0 per cent from 2028 onwards, the same as in Budget 2025.

 

●

The unemployment rate to average 6.5 per cent in 2026, down from the 6.8 per cent expected in Budget 2025, and to continue its downward trend reaching 6.0 per cent by 2029, the same as in Budget 2025.

 

●

The Bank of Canada to keep its policy rate at 2.25 per cent through 2026. With the economy picking up, short-term interest rates were then expected to start rising in early 2027 reaching 2.7 per cent by 2028, a slightly higher peak compared to Budget 2025. Short-term rates were expected to settle at 2.6 per cent by 2029, the same as in Budget 2025.

 

●

The 10-year bond rate to increase from an average of 3.4 per cent in 2026 to 3.6 per cent in 2027 and 3.7 per cent from 2028 onwards, about 10 basis points higher than the expectations in Budget 2025.

 

●

In the U.S., AI investment and solid consumption, supported partly by strong equity markets, are driving growth. While real GDP growth in the U.S. was revised up to 2.4 per cent in 2026, this has not translated into stronger near-term Canadian growth expectations.

Scenario analysis below and Annex 1 box titled Economic and Fiscal Impact Sensitivity to Higher Oil Prices show how the results of the March survey change with different macroeconomic assumptions.

 

 

 

 

 

What This Means for You

The economy is expected to continue growing, but the outlook is subject to heightened global uncertainty, including ongoing trade tensions and geopolitical risks. Private sector economists generally expect continued, robust growth over the next two years, though forecasts vary widely and Canada is not immune to this global energy shock. Higher oil prices will put upward pressure on inflation in the near term, but overall economic conditions remain broadly stable, with the labour market continuing to hold up. To support long-term affordability and job opportunities, the government is focused on creating the conditions that allow businesses to invest, grow, and sustain employment—by fostering a stable, competitive, and resilient economic environment as Canada adapts to a more uncertain global landscape.

Economic Scenario Analysis

With the ongoing conflict in the Middle East, alongside tariffs and trade-related uncertainty, risks to the outlook remain elevated. To assess risks to the March survey forecast, the Department of Finance Canada consulted with private sector economists, with particular focus on the future path of oil prices. While risks stem from multiple sources, the scenarios presented below—while not exhaustive—are primarily anchored on alternative paths for the Middle East conflict and its transmission through energy markets, supply chains, global demand, and financial conditions. These scenarios help assess risks around the baseline forecast and support prudent fiscal planning.

Since the survey was completed, developments in energy markets point to a somewhat stronger near-term outlook for oil prices. These developments suggest WTI prices could average around US$80 for 2026, roughly US$10 above the level assumed in the March private sector survey. Based on estimated economic and fiscal sensitivity to higher oil prices (see the box entitled “Economic and Fiscal Impact Sensitivity to Higher Oil Prices” in Annex 1), such an increase in oil prices would improve the federal budgetary balance by about $1.9 billion. That said, the impact of oil prices on the economic and fiscal outlooks will depend on the evolution of other macroeconomic variables such as interest rates and global demand.

Details of the economic outlook, scenario analysis, and the sensitivity of key economic variables to oil price movements can be found in Annex 1.

 

 

 

 

Higher Investment Scenario

In the Higher Investment scenario, a prolonged disruption to global oil supply pushes WTI prices to peak at around US$115 per barrel in the second quarter of 2026. Prices remain elevated for an extended period, reflecting persistent disruptions, heightened geopolitical risk, and slow supply adjustment.

Higher oil prices contribute to higher inflation and weigh on global activity. However, Canada, as a net exporter of oil, benefits from improved terms of trade, driving up national income. The country is also seen as a reliable source of energy products as geopolitical risks and uncertainty in the Middle East persist, supporting demand for Canadian crude oil. Higher oil prices over the outlook, sustained global demand for secure energy supply, and policy efforts to accelerate major projects and catalyse new private investment lead to increased investment in the oil and gas sector and other industries, with positive spillovers to the broader economy through higher employment and income, helping to offset the drag from weaker global activity.

As a result, Canadian real GDP growth is modestly higher on average relative to the March survey forecast (Chart 29), leaving the level of real GDP 0.4 per cent higher than baseline by 2030. Alongside higher oil prices, nominal GDP is $37 billion higher on average per year compared with the survey (Chart 30).

Global Supply Disruptions Scenario

In the Global Supply Disruptions scenario, persistent export constraints in the Middle East and damage to critical energy infrastructure exacerbate global commodity shortages and trigger broader supply chain spillovers. Supply chains worldwide come under strain, as higher energy costs and prolonged shipping disruptions weigh on production and trade. Persistently elevated shipping and freight insurance rates also increase prices for commodities reliant on affected shipping routes in the Middle East, amplifying second-round cost pressures.

These developments further intensify inflationary pressures worldwide. Global monetary policy is more restrictive, while markets are pricing in higher inflation risks, contributing to a greater drag on global activity. Heightened geopolitical tensions also contribute to tighter financial conditions, lower asset prices, and weaker business and consumer confidence. The Canadian economy is not spared, compounded by ongoing adjustments to tariffs, as real GDP is affected through reduced consumption, investment, exports, and productivity. Structural uncertainty about future energy demand also results in a muted investment response by Canadian energy producers, despite higher oil prices.

Canada shifts to a slower real growth path compared with the March survey forecast, with the level of real GDP 1.3 per cent lower at peak impact in 2028. Nominal GDP remains higher than baseline in the first two years of the survey (by $37 billion and $16 billion, respectively) due to the impact of higher oil prices on the terms of trade. However, as prices normalise, weaker economic activity weighs on the level of nominal GDP, which falls below baseline by an average of $9 billion per year from 2028 to 2030.

 

 

 

 

 

 

Fiscal Overview

Budget 2025 marked a strategic shift in the government’s management of public finances, focused on expanding federal capital spending to mobilise investment, while maintaining fiscal responsibility. With significant investments to support infrastructure, innovation, and the development of domestic industrial capabilities, Budget 2025 set out a clear plan to build the strongest economy in the G7.

This fiscal plan remains rooted in fiscal responsibility—not for its own sake, but to create the capacity to invest in long-term economic strength and greater self-reliance. Consistent with this approach, decisions in the Spring Economic Update are guided by the government’s two fiscal anchors: balancing operating spending with revenues by 2028-29 and maintaining a declining deficit-to-GDP ratio.

The government also remains committed to the disciplined implementation of Budget 2025 efficiency measures. This includes the Comprehensive Expenditure Review which, together with other measures in Budget 2025, totals $60 billion in savings and revenues over five years. With implementation well underway, the focus is now turning towards targeted, ongoing horizontal reviews, beginning with efforts to rein in spending on external management and other consulting services. These challenging but necessary actions will continue to support the government’s objective of spending less, to invest more in Canadians.

Fiscal Outlook

While uncertainty remains elevated, the Canadian economy has proved resilient and higher oil prices have improved the terms of trade. The March private sector survey average—which forms the basis for the projections in this update—shows an increase of more than $30 billion per year in the level of nominal GDP over 2025-2029, relative to Budget 2025. This, along with year-to-date results, has translated into an improved fiscal outlook, with budgetary revenues increasing by an average of $7.2 billion annually compared to previous projections. Combined with lower projected expenses, this results in an improvement in the budgetary balance averaging about $12.1 billion annually before new measures, relative to Budget 2025.

Measures included in the Spring Economic Update represent a net cost of $37.5 billion over six years, starting in 2025-26, with 45 per cent focused on bringing down costs for Canadians with the Canada Groceries and Essentials Benefit, measures to drive housing supply, and a temporary suspension of the federal fuel excise tax.

Factoring in economic and fiscal developments, measures in the Spring Economic Update, and policy actions since Budget 2025, the 2025-26 deficit now is projected to be $66.9 billion—$11.5 billion lower than in Budget 2025—or 2.1 per cent of GDP. The deficit is expected to decline to $53.2 billion, or 1.4 per cent of GDP by 2030-31, consistent with the fiscal anchor. In addition, the federal debt-to-GDP ratio is expected to remain relatively stable from 2027-28 to 2030-31, and more than a full percentage point lower than projected in Budget 2025.

 

 

 

 

Table 1 - Economic and Fiscal Developments, Policy Actions, and Measures

billions of dollars

						Projection
		2024–				2025–				2026–				2027–				2028–				2029–				2030–
		2025				2026				2027				2028				2029				2030				2031
Budgetary balance — Budget 2025			-36.3				-78.3				-65.4				-63.5				-57.9				-56.6
Economic and fiscal developments since Budget 2025							17.7				15.7				10.7				8.6				7.6
Budgetary balance before policy actions and measures			-36.3				-60.6				-49.7				-52.8				-49.3				-49.0				-46.4
Policy actions since Budget 2025							-1.3				-4.4				-4.0				-2.8				-2.4				-2.1
Spring Economic Update 2026 (by chapter)
1. Building Canada: All for Canada							0.0				-2.8				-2.3				-2.0				-1.4				-1.4
2. Benefits for Canadians: A Canada for All							-4.9				-8.5				-4.1				-3.6				-3.4				-3.2
Subtotal — Spring Economic Update 2026 measures							-4.9				-11.3				-6.3				-5.6				-4.8				-4.6
Total – Policy actions since Budget 2025, and Spring Economic Update 2026 measures							-6.2				-15.7				-10.3				-8.4				-7.1				-6.8
Budgetary balance			-36.3				-66.9				-65.3				-63.1				-57.7				-56.2				-53.2
Budgetary balance (per cent of GDP)			-1.2				-2.1				-1.9				-1.8				-1.6				-1.5				-1.4
Federal debt (per cent of GDP)			40.7				41.1				41.5				41.8				41.9				41.8				41.6
Budgetary balance — Budget 2025			-36.3				-78.3				-65.4				-63.5				-57.9				-56.6
Budgetary balance (per cent of GDP)			-1.2				-2.5				-2.0				-1.9				-1.6				-1.5
Federal debt (per cent of GDP)			41.2				42.4				43.1				43.3				43.3				43.1
Note: A negative number implies a deterioration in the budgetary balance (lower revenue or higher expenses). A positive number implies an improvement in the budgetary balance (higher revenue or lower expenses).

Capital Investment Outlook

The Spring Economic Update 2026 continues to expand federal capital investment, including $225 million over five years for the Union Training and Innovation Program to enable upgrades to union-run training centres as well as investments to better support Indigenous housing providers. Consistent with the government’s fiscal anchors, capital investments will account for 100 per cent of the deficit by 2028-29 (Chart 31). The government will continue to stand with Canadians dealing with economic challenges.

 

 

 

 

 

 

Economic Scenario Analysis

The Canadian economy has remained resilient amid continued uncertainty in the global landscape. However, recent developments in the Middle East and higher oil prices have introduced considerable near-term risks for economies around the world.

To support prudent fiscal planning around the March private sector survey forecasts, particularly on the future path of oil prices, and to stress-test the baseline forecast, the Department of Finance Canada has developed two economic scenarios. In both scenarios, a prolonged disruption to global oil supply pushes WTI prices to peak at around US$115 per barrel in the second quarter of 2026, with oil prices remaining higher than the March survey for an extended period, reflecting persistent disruptions, heightened geopolitical risk, and slow supply adjustment.

In the Higher Investment scenario, stronger global demand for secure and reliable energy supports increased investment in Canada. In this scenario the budgetary balance would improve by $5.7 billion in 2026-27 and $3.2 billion per year on average over the remainder of the forecast horizon (Chart 32). The federal debt-to-GDP ratio would be expected to decrease to 40.7 per cent in 2026-27 and increase to 40.9 per cent in 2030-31 (Chart 33).

In the Global Supply Disruptions scenario, the conflict in the Middle East disrupts global supply chains and leads to tighter global financial conditions, weighing on economic activity and deteriorating the budgetary balance. In this scenario, the deficit would initially improve by about $3.1 billion in 2026-27, driven by stronger revenues from higher oil prices but deteriorate by an average of $3.5 billion annually over the remainder of the forecast horizon (Chart 32). The federal debt-to-GDP ratio would initially decline to 41.0 in 2026-27, but increase to 42.0 per cent in 2030-31 (Chart 33).

 

 

 

 

Details of the government’s fiscal outlook, the fiscal impact of the scenarios, and the sensitivity of fiscal projections to higher oil prices can be found in Annex 1.

 

 

Preserving Fiscal Sustainability for Future Generations

As the old multilateral order weakens and the world becomes more fragmented and uncertain, the government is focusing on what it can control: making targeted, high-impact investments in Canadians and the economy while maintaining fiscal sustainability.

This approach is disciplined and deliberate. Ensuring that public dollars back high-impact actions with lasting economic returns, while spending less on government operations, will position Canada for sustained economic and fiscal capacity well into the future.

The government’s economic plan is fiscally sustainable. Modelling scenarios developed by the Department of Finance Canada show the federal debt-to-GDP ratio on a declining trajectory over the longer term (Chart 34). Sensitivity analysis around these long-term fiscal projections also indicates the federal debt-to-GDP ratio would still be declining by the end of the projection horizon under the Global Supply Disruptions scenario.

Preserving fiscal firepower is crucial to manage future pressures, including, among others, from recessions, additional defence spending, population aging, climate change, and the transition to net-zero emissions.

 

 

 

 

 

Canada’s Fiscal Advantage

Globally, geopolitical instability, structural economic transformation, and intensifying competition are forcing governments to rethink how they respond to headwinds and build resilience for the future. Standing still is not an option as inaction and underinvestment carry significant costs, including slower growth, diminished competitiveness, and weaker security.

Canada starts from a position of strength to turn this moment of global uncertainty into one of national opportunity.

 

●

Canada’s net debt-to-GDP ratio stands at just 10.2 per cent, compared to the G7 average (excluding Canada) of 101.8 per cent (Chart 35).

 

●

Canada’s net debt burden today is lower than that of any other G7 country, and is even below the levels of those countries prior to the pandemic.

 

●

Canada also has one of the smallest deficits in the G7 as a share of the economy (Chart 36).

This fiscal advantage gives the government the capacity—and the responsibility—to act to build a stronger economy to make life more affordable, to create high-paying jobs, to take care of each other and to determine our future.

 

 

 

 

 

Canada’s fiscal position also stands out among 30 other advanced economies, with a below-average deficit-to-GDP ratio and one of the lowest net debt-to-GDP ratios in the group (Charts 37 and 38).

Canada is also one of only two G7 economies, alongside Germany, to maintain AAA ratings from major global credit rating agencies. These AAA ratings support investor confidence and help keep borrowing costs as low as possible.

In a more uncertain world, the government’s focus on what it can control—delivering lasting economic benefits for Canadians while reinforcing fiscal discipline—will help ensure Canada maintains its fiscal advantage going forward.

 

 

 

 

 

Chapter 1

Building Canada: All for Canada

The world is rapidly changing. Shifting trade patterns, geopolitical tensions, and rapid technological change are impacting the lives of Canadians at an unprecedented rate. Budget 2025 set out the government’s bold and ambitious plan to transform our economy from one that is reliant on a single trade partner to one that is stronger, more self-sufficient, and resilient to global shocks.

We are taking our future into our own hands by building one Canadian economy, powered by new infrastructure—connecting our regions, diversifying our markets, and protecting our communities.

 

These measures build on the ambitious economic plan we are already implementing, including:

 

✓

Accelerating nation-building projects through the Major Projects Office to fast-track key projects through federal review and approval. The 15 projects announced to date represent over $125 billion in capital investments and are expected to support over 60,000 jobs during construction.

 

✓

A Productivity Super-Deduction and enhancements to the Scientific Research and Experimental Development Tax Incentives to encourage further investment. The Productivity Super-Deduction is expected to generate an economic output of up to $9 billion annually over the next ten years, while the enhancements to Scientific Research and Experimental Development Tax Incentives are expected to generate an economic output of $1.2 billion a year.

 

✓

New infrastructure programs targeted at building more housing and stronger communities including the Build Communities Strong Fund—delivering $51 billion to boost investment in infrastructure—from community infrastructure, to health infrastructure, to public transit—in partnership with provinces and territories. Together with the provincial contributions, the projects through the Fund will support an average of 42,000 jobs per year.

 

✓

A Trade Diversification Strategy to help Canadian businesses expand to non-U.S. markets, supported by a $6 billion Trade Infrastructure Strategy to help their products get there. Investments in trade-enabling transportation infrastructrure through the Trade Diversification Corridors Fund and the Arctic Infrastructure Fund are expected to raise productivity and increase gross domestic product (GDP) by up to $21 billion.

 

✓

An Automotive Strategy to strengthen Canada’s auto manufacturing sector and protect the over 500,000 workers the sector supports.

 

✓

An International Talent Attraction Strategy and Action Plan to recruit exceptional foreign researchers to Canadian universities.

 

✓

A Nature Strategy to protect Canada’s nature by conserving 30 per cent of Canada’s lands and waters by 2030.

 

✓

A Climate Competitiveness Strategy to create the conditions to become a global leader in clean technology and clean energy.

 

 

 

 

Canada has always been a nation of builders. To secure a more prosperous, competitive, and sovereign future, we are building Canada as a clean and conventional energy, mining, industrial, and agricultural superpower. We are improving regulatory efficiency, increasing competition, boosting tax and other incentives for new investments, and investing in trade and supply chain infrastructure.

1.1 Delivering for Canadians

The Canada Strong Fund

The government has set out a bold plan to build a stronger Canada.

We are investing in the foundations of long-term prosperity: modern infrastructure that better connects our country; responsible resource development that strengthens our economy and enhances energy security; and sustained support for the innovative companies and skilled workers who will shape Canada’s future.

This is more than an economic agenda—it is a nation-building action plan. Build Canada Strong is about constructing a bridge to a better future—project by project, company by company. While the results will build over time, these are investments that will pay dividends for Canadians in the years—and generations—ahead.

Build Canada Strong is about connecting Canadians to one another and ensuring that an Albertan has a stake in a project built in Newfoundland, and vice versa. It is about uniting Canadians around a shared purpose and shared success.

While Canadians will benefit from these nation-building projects through better jobs, higher economic growth and greater security, the government is determined to ensure that all Canadians also have a stake—a fair stake—in the projects themselves.

To do that, we are changing the equation. The government is launching Canada’s first sovereign wealth fund—the Canada Strong Fund. This fund is about making sure that the returns from Build Canada Strong are shared with Canadians.

A Clear Mission

Designed to give all Canadians a direct stake in the Build Canada agenda, it is a Government of Canada fund—and therefore, a fund that belongs to all Canadians. The Fund will invest in strategic Canadian projects and companies alongside other investors—with a clear objective to achieve commercial returns to build the wealth of Canada.

 

 

 

 

This is how the Canada Strong Fund will work:

An Initial Endowment that is Designed to Grow

Initially, the government will provide $25 billion over 3 years, on a cash basis, to seed the Canada Strong Fund.

The Fund will increase over time, both from the returns that it generates, and through other assets that the government may allocate to it.

Asset optimisation will help address two complementary priorities: unlocking the full value of existing federal assets and directing that capital toward investments with the highest potential return for Canada and Canadians.

An Investment Strategy that Emphasizes Returns

The Canada Strong Fund will focus on building Canada. From infrastructure to advanced manufacturing to energy and mining, the Fund will have a mandate to deliver market-rate returns for Canadians across the economy.

Leading Canadian companies will help build our energy, transportation and telecommunications infrastructure and future economy.

Global investors are increasingly looking to Canada as a destination for major new investments, and the federal government is working to ensure these projects move forward.

As Canadian companies and international partners invest and succeed here, Canadians should also have a stake – so that everyone benefits. That is why the Canada Strong Fund will participate alongside other investors on a fully commercial basis.

This represents a new ownership opportunity for Canada and Canadians, with the Fund focused primarily on equity investments.

The Major Projects Office is working closely with project proponents as they move through regulatory approvals, and the government is assessing projects for potential designation under the Building Canada Act.

At the same time, institutions such as the Canada Infrastructure Bank, Export Development Canada, the Business Development Bank of Canada, the Canada Indigenous Loan Guarantee Corporation, and a range of departmental programs are already playing a critical role in advancing large-scale projects and supporting the growth of Canadian companies.

Where the federal government is active, the Canada Strong Fund will focus on complementing these efforts—investing only in minority positions alongside private capital in this growing pipeline of projects and companies, and generating strong, commercial returns for Canadians.

An Independent, Professional Crown Corporation Focused on Performance

Independence and professional management ensures a sovereign wealth fund can make long-term, economically sound investment decisions. This structure is widely regarded as global best practice because it strengthens transparency, credibility, and long-term performance through consistent, expert management.

The Canada Strong Fund will operate at arms-length from government. We will create a new Crown corporation, and its work will be guided by a CEO and a qualified independent board of directors.

This model will ensure that both in the near-term and the long-term the Fund remains focused on its mission – supporting the transformation of the economy and creating wealth for Canadians.

A Simple Way for Canadians to also Directly Participate

We are building Canada together—and the Canada Strong Fund is designed to take that effort even further. The government intends to offer Canadians the opportunity to participate directly in the Fund through a new, broadly accessible retail investment product.

This means that any Canadian who wishes to can invest some of their savings into the Canada Strong Fund.

 

 

 

 

The government intends to consult on the specific design of this product, but Canadians can expect the following features:

 

●

Broadly accessible to Canadians from coast to coast to coast;

 

●

Easy and simple to purchase, hold, and transact;

 

●

As the Canada Strong Fund succeeds, investors will be able to share in the upside, while their initial invested capital will be protected.

When Canadians invest directly in the Canada Strong Fund, they will help fuel its growth and increase its ability to deliver meaningful benefits across the country.

What Comes Next

The government will establish a dedicated Canada Strong Fund Transition Office to lead a targeted engagement with market participants and regulators, and rapidly finalise the Fund. Further details will be provided in the coming months.

The Canada Strong Fund joins a federal ecosystem of Crown corporations dedicated to helping promising companies and projects succeed either here at home or through exports to the world.

 

●

The government believes that for each of these financing vehicles to have a maximum impact, they must have clear, focused mandates. To ensure clarity of purpose and avoid any risk of duplication, the government will undertake comprehensive mandate reviews for each organization in the federal financing ecosystem.

 

 

Strengthening the Future of Canada’s Airports

Airports are vital national assets that support Canada’s economic competitiveness, trade, tourism, and regional connectivity. Modern and efficient airport operations are essential to ensuring the long-term stability of Canada’s air sector.

 

 

 

 

As set out in Budget 2025, the government is committed to reforming Canada’s airports system to lower air passenger costs and better position airports to attract private investment. In this context, since the budget, the government has begun to consider reforms to modernise the governance of airport authorities, explore options to update the framework for airport rents, and to increase the capacity of airports for economic development and reinvestment in infrastructure.

The government is also assessing opportunities to unlock the full value of airports in support of investments in Canada’s long-term growth, including through alternative models of ownership. This work will be advanced with the input of the airport authorities and other stakeholders including airlines and local governments.

 

Additionally, the Spring Economic Update 2026 announces the government’s intention to introduce legislation to ensure it can obtain the information necessary for a comprehensive evaluation of airport reforms.

Timely Resolution of Air Passenger Complaints

The Government of Canada created the Air Passenger Protection Regulations in 2019 to establish minimum requirements for airlines to protect the rights of passengers in Canada, including compensation obligations. They create a set of minimum obligations from airlines towards passengers—however, there is a significant backlog of passenger complaints.

 

The Spring Economic Update 2026 announces the government’s intention to clear the backlog of air travel complaints by engaging a neutral, third-party dispute resolution organisation based on a proven model in the U.K. and E.U. Beyond the backlog, the government also intends to develop a simpler and more effective regulatory regime, so that rules are clearer and passengers are fairly and more quickly compensated when air travel does not go as planned.

1.2 Building to Grow

The bold and ambitious plan set out in Budget 2025 is already translating into action—advancing major projects, cutting red tape, and launching generational infrastructure investments that will build stronger communities.

The government has relied on targeted investment vehicles in the past to advance strategic economic objectives. Federal investment vehicles are actively backing projects to crowd in private capital and support growth in priority sectors. Collectively, investments through key federal vehicles have totalled more than $20 billion over 2020-2025 (Chart 1.2), helping to strengthen Canada’s productive capacity and economic resilience across key sectors.

 

 

 

 

 

These investments help ensure Canada can seize strategic opportunities, boost our global competitiveness, and build a stronger, more resilient economy.

The Spring Economic Update 2026 builds on this momentum, with strategic investments in projects and infrastructure that further support investment, productivity, and growth, enabling Canadians and Canadian businesses to seize new opportunities and drive Canada’s economic growth.

Advancing Nation-Building Projects Through the Major Projects Office

The Major Projects Office is advancing nation-building projects faster and more responsibly to help connect our economy, diversify our industries and trade, and create high-paying jobs and careers for generations to come. Working alongside partners, we are unlocking Canada’s economic potential, while respecting our environmental responsibilities and the rights of Indigenous people.

The Major Projects Office has announced 15 projects, representing over $125 billion in capital investments, and is developing 6 transformative strategies. On March 12, the government announced four new projects developed out of the former Arctic Economic and Security Corridor strategy and referred them to the Major Projects Office. At a time when Canada’s North is undergoing profound change, driven by rising geopolitical pressures and a rapidly warming Arctic, these projects are critical to strengthening sovereignty, resilience, and long-term economic opportunity in the region. On April 9, less than seven months after the referral of the Port of Montreal’s Contrecoeur Container Terminal Project, the Prime Minister announced that we are breaking ground after a $1.16 billion financing commitment from the Canada Infrastructure Bank. The government also announced an investment from the Canada Growth Fund in Nouveau Monde Graphite on April 9. The government will continue to refer projects and finance projects on a rolling basis.

The Major Projects Office will derisk nation-building projects in order to attract the financing required to move them forward. To fill financing gaps, the government is deploying available capital from the Canada Infrastructure Bank, Canada Growth Fund, Canada Indigenous Loan Guarantee Corporation, and Export Development Canada. These Crown corporations will advance financing solutions that deliver value for money for taxpayers.

 

 

 

 

Major Nation-Building Projects

Referred projects to date represent over $125 billion in capital expenditure by the private sector, federal, and provincial governments

 

 

 

 

 

Projects Referred to the Major Projects Office
15 projects		6 transformative strategies
Will support over 60,000 jobs		Represents over $125 billion in new investment

 

Projects		Proponent		Sector		Location
Canada Nickel’s Crawford Project		Canada Nickel Company		Mining		Timmins, Ontario
Contrecoeur Terminal Container Project		Montreal Port Authority		Industrial		Contrecoeur, QC
Darlington New Nuclear Project		Ontario Power Generation		Electricity		Bowmanville, ON
Iqaluit Nukkiksautiit Hydro Project		Nunavut Nukkiksautiit Corporation		Electricity		Iqaluit, Nunavut
Ksi Lisims LNG		Western LNG, Nisga’a Nation, Rockies LNG Partners		Energy		Pearse Island, British Columbia
LNG Canada Phase 2		LNG Canada		Energy		Kitimat, BC
McIlvenna Bay Foran Copper Mine Project		Foran Mining		Mining		East-Central, SK
North Coast Transmission Line (NCTL)		B.C. Hydro		Electricity		Northwestern British Columbia
Northcliff Resources’ Sisson Mine		Northcliff Resources Ltd.		Mining		Sisson Brook, New Brunswick
Nouveau Monde Graphite’s Matawinie Mine		Nouveau Monde Graphite		Mining		Saint-Michel-des-Saints, Québec
Red Chris Mine Expansion		Newmont Mining & Imperial Metals		Mining		Northwestern British Columbia
Taltson Hydro Expansion		Government of the Northwest Territories (GNWT)		Electricity		Great Slave Lake region, Northwest Territories
Mackenzie Valley Highway		Government of the Northwest Territories		Transport		Wrigley to Inuvik, NWT
Grays Bay Road and Port (GBRP)		West Kitikmeot Resources Corporation		Transport		Kitikmeot Region, Nunavut
Arctic Economic and Security Corridor (AESC)		Tłıchǫ Gov’t, Dene First Nation, and the GNWT		Transport		Slave Geological Province, Northwest Territories

 

Strategy		Sector		Location
Alto High-Speed Rail		Transportation		Ontario-Quebec Corridor
Critical Minerals Strategy		Mining		All provinces except for PEI
Northwest Critical Conservation Corridor		Electricity, Mining		Northwestern British Columbia, Southern Yukon
Pathways Plus		Energy		Alberta
Port of Churchill Plus		Transportation		Manitoba
Wind West Atlantic Energy		Energy		Nova Scotia, New Brunswick, PEI, Newfoundland and Labrador

 

 

 

 

Establishing One Project, One Review

The Government of Canada is advancing efforts to realise “one project, one review” by working with provinces and territories to establish cooperation agreements. On June 2, 2025, Canada’s First Ministers agreed to “work together toward efficiently and effectively implementing ‘one project, one review’ with the goal of a single assessment for all projects.” This will implement a more efficient assessment process that minimises duplication and delivers major projects faster while reinforcing strong environmental protections.

Co-operation agreements with provinces enable the use of new flexibilities in the Impact Assessment Act. These flexibilities include the ability to provide for substitution to a single harmonised process that draws on the best available provincial and federal expertise. Cooperation agreements can also allow for early assessment decisions and full substitution to a provincial process that meets both federal and provincial requirements. They do not affect the duty of proponents, provinces, territories, and the federal government to fully consult with Indigenous people whose rights may be affected. This will help ensure accelerated assessments for major projects, including projects of national interest, and signal to investors that Canada’s federal and provincial governments are committed to working together to enable development, while protecting Indigenous rights and the environment.

The government has been negotiating agreements with provinces and is delivering results on this commitment. Agreements have already been finalised with Ontario, New Brunswick, Prince Edward Island, Alberta, Manitoba and Nova Scotia and a draft agreement with Newfoundland and Labrador has been published for public comment and others are under discussion. In 2019, British Columbia was the first province to sign a cooperation agreement with Canada.

The government is currently developing policy, operational, regulatory and legislative measures to achieve all federal decisions on major projects within a maximum of two years, down from the previous five-year target. These measures will support timely decisions, reduce risks for proponents, boost investor confidence, and support Canada’s competitiveness in a fast-changing global economy.

 

 

 

 

 

Prioritising Nation-Building Projects in Tax Processes

Corporate taxpayers contemplating significant transactions often require certainty on tax treatment before going ahead with a major project. The Canada Revenue Agency (CRA) supports this need by issuing timely and binding advance income tax rulings, which enable businesses to move forward with confidence. Tax rulings help ensure that tax legislation is applied consistently and predictably across transactions to support transparency, fairness, and informed decision-making.

 

To support the government’s objective of building a strong Canadian economy, the Spring Economic Update 2026 announces that the CRA will prioritise requests for advance income tax rulings related to large-scale, nation-building projects—such as housing and infrastructure—as well as projects of national importance. Priority will also be given to advance income tax ruling requests relating to investments that enhance productivity and strengthen critical sectors of Canada’s economy, including clean economy initiatives and projects that may benefit from Canada’s suite of clean economy investment tax credits.

In Budget 2025, the government reaffirmed its commitment to the clean economy investment tax credits by increasing CRA resources by $146 million over five years, starting in 2025-26, for the administration of these measures. With this additional funding, the CRA is expected to increase processing of claims by more than 4.5-fold by July 2026. This targeted investment will help the CRA reduce the backlog of claims over the course of 2026 and ensure a more timely delivery of these credits going forward.

Advancing Critical Minerals Projects

Critical minerals are essential to the technologies and industries that power the modern economy and contribute to a more secure future. They are used in a wide range of essential products ranging from mobile phones and solar panels to electric vehicle batteries, medical devices and defence applications. Global demand for critical minerals is set to grow rapidly over the next two decades, and Canada is well-positioned to continue building on its position as a global leader in the responsible development of critical minerals. As geopolitical competition intensifies, securing supply chains for these critical minerals has become a strategic imperative. To help combat rising risks across global critical minerals supply chains and to strengthen our economic security, the government is taking action to grow Canada’s critical minerals industry and to develop resilient value chains through trusted international partnerships.

Canada is advancing critical minerals production and processing projects across the country, supported by targeted federal actions and partnerships. This includes working through the Critical Minerals Production Alliance, a Canada-led G7 initiative to diversify and secure global critical minerals production and supply. The following highlights selected projects along the critical minerals value chain.

 

 

 

 

Critical Minerals Production and Processing Projects

		Project		Type		Location		Federal investment
		Nouveau Monde Graphite – Matawinie Mine		Graphite mine		Saint-Michel-des- Saints, Québec		●  ~$462 million debt financing   ●  ~$149 million equity financing   ●  Announced October 2025
		Rio Tinto Fer et Titane – Scandium Oxide		Commercial-scale scandium oxide production		Sorel-Tracy, Québec		●  $25 million equity-like financial royalty structure   ●  Announced in October 2025
		Focus Graphite		Graphite for defence and advanced manufacturing		Baie-Comeau, Québec		●  $14.1 million   ●  Highlighted October 2025 under Critical Minerals Production Alliance
		Frontier Lithium Processing Facility		Lithium processing facility		Thunder Bay, Ontario		●  $2.3 million   ●  Highlighted in March 2026 at Prospectors & Developers Association of Canada (PDAC) Convention
		British Columbia Hydro Transmission System Upgrades		Electricity transmission capacity for critical minerals projects		Kamloops, British Columbia, and Northwest British Columbia		●  $84.0 million   ●  Highlighted in March 2026 at PDAC
		E3 Lithium – Clearwater Project		Lithium refining demonstration program		Olds, Alberta		●  $36.5 million   ●  Highlighted in March 2026 at PDAC
		Cyclic Materials		Rare earth elements recycling		Kingston, Ontario		●  ~$34.4 million equity financing   ●  $9.1  million   ●  Highlighted in March 2026 at PDAC
		Saskatchewan Power Corporation		Electricity grid connection to support critical minerals mining		Athabasca Basin region and Regina, Saskatchewan		●  $18.1 million   ●  Highlighted in March 2026 at PDAC

 

 

 

 

Expanding the Carbon Capture, Utilization, and Storage Investment Tax Credit to Enhanced Oil Recovery

The refundable Carbon Capture, Utilization, and Storage (CCUS) investment tax credit provides support for investments in CCUS technologies.

The extent to which the CCUS tax credit is available to an eligible CCUS project and associated eligible equipment depends on the end use of the carbon dioxide (CO₂) that is captured. Currently, eligible uses include dedicated geological storage and storage in concrete, but not enhanced oil recovery (EOR).

 

Following through on the commitment made by the government in the November 27, 2025, Canada-Alberta Memorandum of Understanding, the Spring Economic Update 2026 proposes that EOR be made an eligible use for the purposes of the CCUS tax credit.

Credit rates would be set at 30 per cent for direct air capture equipment, 25 per cent on other capture equipment, and 18.75 per cent on transportation and storage/use equipment. These rates reflect the additional revenue stream available to CCUS projects that perform EOR. Like other forms of eligible CO₂ uses, CCUS projects that perform EOR would be required to permanently store the captured CO₂.

EOR would be made an eligible use starting the Day of the Spring Economic Update 2026, subject to the designation of a jurisdiction by the Minister of the Environment.

It is estimated that the proposal will increase federal revenues by $395 million over four years, starting in 2027-28.

Implementing Accelerated Capital Cost Allowance Rates for Low-Carbon Liquefied Natural Gas Facilities

As a leading global energy producer, Canada is supporting investment in lower-emissions liquefied natural gas (LNG) through targeted tax measures. Budget 2025 proposed to reinstate the accelerated capital cost allowances (CCAs) for eligible LNG equipment and related buildings, but only for low-carbon LNG facilities.

 

The Spring Economic Update 2026 proposes the implementation details for this measure.

 

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To be eligible for an accelerated CCA, the expected emissions intensity of an LNG facility’s on-site liquefaction activities, measured in tonnes of carbon dioxide equivalent per tonne of LNG produced annually (tCO2e/tLNG), would have to be less than or equal to 0.20 tCO2e/tLNG. The accelerated CCA rate would be 50 per cent for liquefaction equipment and 10 per cent for facility non-residential buildings.

Facilities with an expected emissions intensity higher than 0.20 tCO₂e/tLNG would not be eligible for the measure.

The measure would apply to property acquired on or after November 4, 2025 and before 2035.

Launch of the Build Communities Strong Fund

Building the future we want starts with building the communities we want. In Budget 2025, the government announced the Build Communities Strong Fund (BCSF) to revitalise local infrastructure—the hospitals, universities, and colleges that serve our people, the roads and bridges that move our goods, and the water and transit systems that sustain our towns.

The BCSF will build new infrastructure to speed up work and bring down costs. When colleges and universities have aging buildings, when hospitals are over capacity, and when water systems fail, people and communities are adversely impacted. The Fund will spur economic activity, create new careers in the skilled trades, and give investors the confidence to build around reliable public infrastructure.

The Build Communities Strong Fund launched on April 7, 2026, with a $51 billion investment over 10 years, starting in 2026-27, and $3 billion ongoing.

 

 

 

 

 

 

 

 

Under this program, the federal government is working with provinces and territories to develop successful partnerships through negotiated bilateral agreements to lower the costs to build new homes.

Jurisdictions with the highest development charges will be required to reduce them for three years, with flexibility for municipalities where these charges are not a barrier. Other jurisdictions must maintain existing development charge restrictions (such as freezes or deferrals) and avoid introducing new taxes that limit housing supply. As part of the government’s partnership with Ontario, described in Chapter 2, the province has agreed to reduce development charges by up to 50 per cent for three years in its largest and fastest-growing cities, covering approximately 80 per cent of the province’s population.

 

 

 

 

 

Making the Employee Ownership Trust Tax Exemption Permanent

An Employee Ownership Trust (EOT) is a form of employee ownership where a trust holds shares of a corporation for the benefit of its employees. EOTs may be used to facilitate the purchase of a business by its employees and provide an additional option for succession planning. A temporary $10 million capital gains tax exemption, in effect for the 2024, 2025, and 2026 tax years, was introduced in the 2023 Fall Economic Statement to incentivise EOT creation. This exemption was expanded to include sales to worker cooperatives, as was announced in Budget 2024.

Building and buying Canadian is a core mission of our government—and EOTs empower Canadian workers to buy into their businesses. With a generational wealth transfer set to occur over the coming decades—EOTs will enable workers to participate directly in building Canada strong.

 

To ensure that eligible businesses and workers can benefit from employee ownership, the Spring Economic Update 2026 proposes to make this tax exemption permanent.

Improving Administration for the Scientific Research and Experimental Development Tax Incentive Program

As announced in Budget 2025, on April 1, 2026, the Canada Revenue Agency (CRA) introduced an elective pre-claim approval process to provide businesses with an up-front technical approval of their eligible Scientific Research and Experimental Development (SR&ED) projects, before businesses undertake any work or incur costs.

The CRA incorporated feedback from businesses and industry associations into the design of the pre-claim approval process, which can be completed in four easy steps and provides businesses with an eligibility determination within eight weeks. For claims submitted through this elective process that require an expenditure review, processing time will be cut in half to 90 days from 180 days.

These improvements underscore the government’s commitment to co-developing solutions with industry partners and to continuing to modernise the SR&ED program’s administration to meet businesses’ needs.

 

 

 

 

 

 

 

 

1.3 Supporting Strategic Sector Initiatives

The global trade landscape is rapidly changing, as the United States fundamentally transforms all of its trading relationships. The effect is profound—displacing workers, disrupting supply chains, forcing companies to rethink where they source their materials and products, and causing uncertainty that is curbing investment.

To help businesses and workers adapt and remain competitive, the government introduced strategic support initiatives, including the newly launched automotive strategy, alongside targeted actions to strengthen domestic market conditions and meet labour needs. Together, these actions stand to reinforce Canada’s industrial strengths, expand market opportunities, and secure high-quality jobs across the country.

Measures Taken to Support Workers and Businesses

Behind every tariff announcement is a worker wondering about their job, a family worried about their income, or a business or community concerned about its future. Our approach is clear: support Canadian workers, defend Canadian industries, and invest in long-term resilience.

Budget 2025 set out more than $25 billion to support workers and

businesses impacted by U.S. tariffs and trade disruptions

 

These initiatives will help workers acquire new skills and businesses retool their production and diversify their products, while spurring more domestic demand for Canadian businesses. Building on the $25 billion in supports set out in Budget 2025, the government subsequently announced an additional $1.6 billion over six years, starting in 2025-26, for workers and businesses affected by tariffs and trade disruptions.