Carney's Canada Budget Puts Sovereignty First, with C$11.2bn to Tackle Homelessness

Canadian Prime Minister Mark Carney unveiled the second federal budget of his term on Thursday. Taking advantage of an oil revenue windfall, he has included tens of billions of dollars in new spending in the budget, which focuses on building national sovereignty and addressing the high cost of living.

The budget is titled 'Masters of Our Destiny.' Carney said on Thursday, 'That's what this budget does: it's the next big step in our action plan to make this country more independent, more sovereign.' He said it focuses on growth, on people and on that sovereignty, so Canadians can live their lives as they wish.

New spending totals C$142 billion over the next five years, thanks to better-than-expected revenues from oil prices bolstered by the Iran War. Canada's deficit is over C$50 billion ($36 billion), with no path to balance shown in the budget, although Carney has kept his previous fiscal goals intact.

According to the budget, Canada's GDP is still expected to grow modestly in the next year, outpacing all G7 countries except the United States. Its unemployment rate, while unsteady month to month, is overall lower than last year.

But as people continue to feel squeezed by inflation and unaffordable housing, pressure has been building on Carney to translate his major investments into relief for the average Canadian. Some sectors of the economy are feeling deep pain due to US President Donald Trump's tariffs on key Canadian industries, leading to thousands of job losses and uncertainty that has slowed business investment.

One of the largest line items in Carney's second budget is a C$11.2 billion commitment over the next four years to combat homelessness. This includes funding for supportive housing, mental health and addictions treatment. Statistics Canada reported last year that one in eight Canadian households have experienced a form of homelessness in their lifetime.

The government will also boost a grocery benefit available to low- and modest-income Canadians, which is estimated to provide C$2,570 for a family of four within one year.

Canada's opposition Conservatives have been pressing the Liberal government on cost of living and have routinely accused the prime minister of spending too much time on foreign trade missions and not enough on kitchen-table issues. According to Statistics Canada, average hourly wages have not kept up with inflation, and food bank usage has hit record highs. The average price of a home in Canada has dropped around 22 percent in recent years, mostly due to a clampdown on immigration, but houses are still too expensive for many in major cities such as Toronto and Vancouver.

After record population growth in 2023, fuelled largely by immigration, Canada has scaled back its newcomer targets significantly, including a cap on international students and temporary foreign workers. The Carney government has previously said it will keep its permanent resident admission target at 380,000 people annually until 2028, while gradually reducing temporary resident arrivals to 370,000. In the new budget, Carney has opted to keep immigration levels flat. A Royal Bank of Canada report in September warned that without immigration, the country's population would shrink to half its size by the turn of the century; the Conservative opposition, on the other hand, has called on the government to lower its targets further.

A big focus of the Carney government has been reducing Canada's reliance on the US as a trade partner, while cushioning the blow from Trump's tariffs on its key sectors. Last year it promised millions in backing for businesses working to develop new export markets and lowered Canada's marginal effective tax rate in a bid to stop businesses moving to the US to escape tariff pains. This budget builds on that, with plans to support specific sectors hit by US tariffs, such as steel and forestry. Since March 2025, the Carney government has set aside nearly C$44 billion in support for workers and businesses hit by US tariffs, the budget notes, stating that diversification will take time given the scale and depth of Canada's economic relationship with the United States, but that the shift is underway.

Sovereignty is a big theme in the second budget, which proposes funding for different measures to strengthen Canadian identity, from the arts to space. Canada is the only G7 country that does not have the capability to launch its own rockets; a budget line item looks to change that, with C$2.7 billion earmarked for developing Canadian space technology and launch infrastructure. On arts and culture, Carney is promising a tax exemption on income made through original and creative artistic works. The budget also sets aside C$32.2 million over four years to establish a free national digital library for Canadians, which will launch with at least 200 titles.

On defence, Carney had previously pledged to significantly boost spending to meet the NATO target of 5 percent of annual GDP by 2035. This year's budget provides some insight into where that money is being spent. That includes a marketplace, launched earlier this year, to sell Canadian-made drones, which will get a cash injection of C$2.3 billion over five years. More funding will also go to support Operation Reassurance, Canada's largest overseas deployment mission, which deters Russian aggression in eastern Europe.