Liberals target affordability to meet era of uncertainty in spring fiscal update

OTTAWA — The federal Liberals say��they’re��getting a windfall from better-than-expected fiscal revenues and are��largely putting��that money back into circulation to support households and build up the economy.��

But Ottawa’s spring economic update also sees some darker clouds on the horizon as uncertainty over the Iran war and U.S. tariffs threatens growth in the years ahead.��

Finance Minister François-Philippe Champagne on Tuesday tabled Canada Strong��For��All, a mid-year fiscal update that includes $54.5 billion in new costs and spending since Budget 2025.��

Improved revenues and reduced expenses elsewhere mean the spring economic update includes $37.5 billion in net new spending.��

The Liberals now estimate last year’s federal deficit came in at $66.9 billion, more than $11 billion short of the $78.3 billion forecast in the 2025 budget, thanks��largely to��improved economic performance and some lapses in planned spending.��

Deficits for this and future years will also be marginally smaller than forecast — and would be sharply lower if not for a jump in planned new spending.��

Champagne told reporters at an embargoed reading of the 167-page document that the spring economic update is about “charting a path forward through the fog of uncertainty.”��

He said Canada’s economy has been “resilient” despite headwinds from U.S. tariffs and global geopolitical instability triggered by the war in Iran.��

Forecasts prepared by private sector economists predict real gross domestic product will grow 1.1 per cent this year and 1.9 per cent next year — marginally lower than projections in Budget 2025.��

Those surveys were done in early��March, before��many economists revised down their economic forecasts in response to the prospect of a longer-lasting war in the Middle East keeping global energy prices elevated.��

While Canada’s economy and federal revenues can both benefit in the short term from higher oil prices, Ottawa’s update warned of sharp risks if a persistent conflict deals lasting damage to global supply chains.��

Under that scenario, “the Canadian economy is not spared,” the update says.��

Lower economic growth globally would be compounded by U.S. tariffs at home, weighing on GDP through “reduced consumption, investment, exports, and productivity,” the document says.��

“Much of the risk is tilted to the downside at this point and, for the Canadian economy, there could really be challenges going forward as a result of that,” said Randall Bartlett, deputy chief economist at Desjardins.��

In response to that uncertainty, the federal government is sticking to its plan to build up capital projects and attract more investment. Ottawa is also using a boost in fiscal revenues — in part from higher oil prices — to support Canadian households.��

Spending since the fall budget is led by the already announced temporary boost to the GST benefit, soon to be renamed the Canada Groceries and Essentials Benefit. Costed at $11.8 billion over five years, increased payments start with a 50 per cent boost to the benefit slated for June 5.��

The federal government’s��roughly four-month��pause on the fuel excise tax, announced earlier this month, is the other top-line affordability item added to Ottawa’s books.��

Bartlett said that any extra fiscal room the federal government found since the fall budget was��largely used��up in new spending and revenue reductions.��

“If I were a cynic, I would look at the profile for the deficit going forward and say the federal government wanted to match what the deficit was in Budget 2025 — and they did an excellent job of that,” he said.��

Heading into the spring economic update, federal Conservative Leader Pierre Poilievre called on the Liberals to slash spending and get the deficit back on a path to balance.��

Ottawa’s planning horizon now sees the deficit shrink to $53.2 billion by 2030-31, but there is no plan to present a balanced budget.��

In the spring update, the federal government sticks to its fiscal anchors of a declining deficit-to-GDP ratio and a balanced operating budget in the next three years.��

The federal debt-to-GDP ratio — previously a fiscal anchor under former prime minister Justin Trudeau’s government — is projected to rise modestly but remain broadly stable over the government’s planning horizon.��

But Bartlett said debt-to-GDP is also on a “materially lower track” compared to the fall’s forecasts because upward revisions to past economic data have gone in Ottawa’s favour, giving the government a better ratio to��showcase.��

“Ultimately, that’s the measure of sustainability that’s looked at in the investment community and the federal government is on a better track than it was coming out of Budget 2025,” he said.��

Ottawa’s spring update also includes a proposal to spend billions of dollars convincing young Canadians to enter the skilled trades to support the federal Liberals’ aggressive infrastructure and housing agenda.��

Prime Minister Mark Carney unveiled plans Monday for Canada’s first sovereign wealth fund to support nation-building projects, though few��additional��details came in the spring economic update.��

Plans to borrow $25 billion for the��initial��capitalization of that fund were not��identified��in a line item in the fiscal update. Champagne said that’s standard practice in accrual accounting.