Federal Spring Economic Update 2026 offers incremental tax, business growth measures

When Mark Carney came to power in March 2025, the Liberal party’s continued minority status in Parliament necessitated compromise with the opposition parties to ensure passage of key legislation such as budget bills. But a funny thing happened about a year later: a series of MP floor crossings and three by-election wins delivered a majority that—at least in theory—gave the Liberals both the legislative headway and political runway to make bold policy decisions. Spring Economic Update 2026 could have been a more pronounced swing for the fences to attract global investment, reinvigorate productivity, cut expenses by more aggressively paring back the federal civil service (to reduce our national deficit/debt) and create a more capital-friendly environment to help diversify our economy and mitigate some of the risks associated with an over-reliance on the U.S. as our go-to trading partner.

Maybe next time?

To be clear, the Spring Economic Update (which replaces fall economic updates after the budget schedule was shifted to autumn) features plenty of new spending and some business-friendly measures—such as lower combined employee-employer CPP premiums and major investments in skills training, as outlined below. But with expectations for grand ideas running so high, another set of incremental policies is unlikely to create the economic waves needed to boost investment in our perennial slow-growth economy. At least the update offered some positive fiscal news.

Ottawa is now projecting a deficit of $67 billion for the 2025-26 fiscal year, rather than the roughly $78.5 billion shortfall outlined in Budget 2025. The reason for the rosier picture? Increased tax receipts, particularly from Canada’s oil and gas sector, thanks to skyrocketing fuel prices due to the ongoing Middle East conflict. The deficit is still on track to decrease to $53 billion in 2030-31. Of course, this could all change, pending the outcome of that conflict, and how the oil shock impacts everything from inflation to the global supply of oil and gas. A paragraph in the update highlights the precariousness of economic forecasting nowadays (or relying on sunny government projections):

“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.”

Undeterred, the Carney government says it has the policy toolkit to build a stronger, more resilient economy. The 2026 Spring Economic Update tables several key proposals* at a net cost of $37.5 billion over six years. Highlights include:

• A new arms-length $25 billion sovereign wealth fund (to be managed by a Crown corporation), called the Canada Strong Fund. The fund is intended to help drive investments in key infrastructure and other nation-building projects. Few details about the measure have been made available, but the government says that it will be focused primarily on equity investments and that Canadians will have an opportunity to participate through retail investment products
• A reduction to the base Canada Pension Plan contribution rate, to 9.5 per cent from 9.9 per cent, effective January 1^st, 2027
• Making the Employee Ownership Trust Tax Exemption permanent. The measure exempts as much as $10 million in capital gains realized on the sale of a business to an employee ownership trust or worker cooperative corporation, subject to certain conditions. The exemption is intended to provide entrepreneurs with more options for succession planning and to facilitate the purchase of a business by its employees
• $2 billion over five years, starting in 2026-27, and $262 million ongoing, to help expedite training and certification for skilled tradespeople. The government is proposing an additional $331 million in funding over five years, starting in 2026-27, and $18 million ongoing, to improve apprenticeship training
• $3.4 billion over five years, starting in 2026-27, and $468 million ongoing, to help apprentices complete training and move into permanent jobs. The Update also proposes giving apprentices a weekly income top up of $400 as they complete in-class technical training, along with a $5,000 bonus to apprentices that obtain certification in a Red Seal trade
• An increase to the annual limit on expenses that can be deducted under the Labour Mobility Deduction for Tradespeople to $10,000 from $4,000, indexed annually to inflation
• $250 million over five years, starting in 2026-27, and $45 million ongoing, to expand skilled trade capacity through the Canadian Armed Forces
• $356.2 million over five years, starting in 2026-27, to extend employment insurance supports for seasonal workers
• Support for international climate finance initiatives, with $3.168 billion over five years to provide climate-related support to developing countries, and approximately $2.7 billion, starting in 2028-29, to expand FinDev Canada’s concessional finance facility to help scale climate-related businesses and projects in emerging markets and developing economies
• A commitment to proceed with plans to reinstate the accelerated capital cost allowances for eligible LNG equipment and related buildings, but only for low-carbon LNG facilities
• Requiring the Canada Revenue Agency to fast-track requests for advanced income rulings related to large-scale, nation-building projects, as well as projects of national importance
• $160.8 million over five years to protect whale habitats as Canada’s marine traffic is projected to increase
• $103.8 million over five years to establish a standalone Defence Investment Agency
• $2 billion over three years, starting in 2026-27, for the Canadian military’s ongoing mission to help train Ukraine’s military
• An intention to amend mortgage insurance rules to permit private mortgage insurers to offer multi-unit mortgage loan insurance on five- to eight-unit residential properties, along with amending mortgage insurance rules to enhance products available to borrowers building new three- and four-unit housing
• An extension of the Home Buyers’ Plan withdrawal repayment grace period—to five from two years—for participants making a first withdrawal between January 1^st, 2026, and December 31^st, 2028
• A reallocation of $2.8 billion over five years to various agencies to support Indigenous housing development initiatives
• Funding to combat financial crimes, including $352.7 million over five years starting in 2026-27 (with $57.8 million in remaining amortization) and $82.1 million ongoing to the Financial Crimes Agency; $46.2 million over five years and $11.5 million ongoing to the Public Prosecution Service of Canada; and $19.6 million over five years and $1.5 million ongoing to the Department of Finance
• $75 million over five years, starting in 2026-27, for the Canada Community Security Program to combat hate-related crimes
• $755 million over five years, starting in 2026-27, and $118 million ongoing, to fund sports in Canada
• $957.8 million over five years, starting in 2026-27, for the Small Craft Harbours Program to repair and maintain small craft harbours
• $794 million in 2026-27 for the Non-Insured Health Benefits Program to provide First Nations and Inuit with coverage for health services and products
• $601 million in 2026-27 to support First Nations youth, along with $700 million over six years, starting in 2025-26, for Indigenous child and family protection initiatives
• Improvements to the Disability Tax Credit, including a streamlining of the application process for individuals with certain long-lasting medical conditions for 2026 and subsequent taxation years, an expansion of the list of medical practitioners who can certify eligibility for the Disability Tax Credit, along with $42.5 million over five years, starting in 2026-27, to the Canada Revenue Agency to administer these changes
• $18.7 million over three years to renew and expand the Community Volunteer Income Tax Program Grant
• A commitment to proceed with several previously announced measures, ranging from immediate expensing for manufacturing, greenhouse and processing buildings and reporting for non-profit organizations to the 21-year rule and tax deferrals through tiered corporate structures. See the full list here

*Note: Some of these measures have been previously announced.

According to the government, the headline measure of the Spring Economic Update is the new Canada Strong Fund. While the concept has some merit, the devil is in the details. That’s because sovereign wealth funds are typically established through surpluses. Not so in this case. Instead, Ottawa plans to borrow to create this fund, akin to leverage investing. Yet the relatively meagre $25 billion target seed capital is unlikely to make a significant impact in our more than $2.5 trillion economy. By comparison, the sovereign wealth fund of Norway—a country of 5.6 million people with a GDP of about $600 billion—has assets worth approximately U.S. $2.2 trillion. There is no doubt that infrastructure investment is critical, but we have other pressing issues to tackle first, namely renegotiating the Canada-U.S.-Mexico agreement and easing trade tensions with the U.S.

And as noted in our analysis of Budget 2025, one of the biggest steps the federal government could take to boost competitiveness and spur our country’s sclerotic productivity would be to engage in a comprehensive review and revamp of the Income Tax Act. Creating the conditions for new and existing businesses to innovate, to compete globally and succeed in markets at home and abroad takes vision and an appetite for risk. In other words, it takes a federal government willing to think and act like business owners who, along with taxpayers more broadly, need a major tax and regulatory unlock. Carney now has a majority government and the power to make that kind of meaningful economic change happen. Will he ever use it?

Armando Iannuzzi, Co-Managing Partner

For more information on the Spring Economic Update 2026, contact a member of our team.