Liberals pledge $129 billion in spending while navigating deficits, housing, and minority pressure
Economists and business leaders have turned their attention to Prime Minister Mark Carney’s fiscal agenda and his expected talks with US President Donald Trump, with the Liberal Party positioned to form a minority government, according to The Canadian Press.
As of Tuesday afternoon, the Liberals had secured 169 seats, falling three short of a majority, with Elections Canada pausing the count of special ballots early Tuesday, as per BNN Bloomberg.
According to The Canadian Press, Carney is expected to meet with Trump soon to begin talks on a new trade and security pact.
The Liberals' platform pledges $129bn in new spending on infrastructure, housing, resource development and defence.
As per CIBC chief economist Avery Shenfeld, budget deficits “look likely to head higher in the near term,” especially with a minority Parliament.
He noted that deficits may exceed campaign expectations but remain “miles below US federal deficits as a share of GDP.”
Shenfeld added that securing support from the NDP or Bloc could mean funding their priorities, including health care and support for the metals sector.
TD chief economist Beata Caranci stated in a note, as reported by The Canadian Press, that the Liberals’ spending plan signals a shift toward domestic resilience, after 80 years of relying on deepening ties with the US.
She said this suggests “a more active role for government in both funding and building than in the past.”
Caranci also noted that despite shared goals with the Conservatives, it is historically unusual for both parties to cooperate in Parliament.
According to Caranci, the pressing question is “who will partner with the new Liberal government to pass legislation,” particularly on trade-related bills influenced by renewed US negotiations.
As reported by the Financial Post, Carney pledged to “build, build baby build” in his post-election speech. He said his plan aims to “catalyze” $500bn in private investment over five years through government spending.
The platform promises to expand affordable housing with $12bn under the Build Canada Homes program, offer tax incentives to multi-residential investors, and cut GST for first-time buyers purchasing homes under $1m.
The Liberals also plan to allocate $30.9bn to defence over four years and scale up investment in infrastructure, digital innovation, defence production, critical minerals and energy, as per the Financial Post.
Reported that Carney’s tax plan, which targets low-income Canadians, would reduce federal revenues by $22bn over four years.
However, the Liberal platform does not aim to eliminate the federal deficit. Instead, the party intends to balance only the “operating” budget, while maintaining capital spending on long-term priorities.
Shenfeld noted that other campaign promises that could affect the fiscal balance include eliminating the consumer carbon tax while retaining a version for large emitters, and cutting the lowest income tax rate.
As per The Canadian Press, Canadian Federation of Independent Business president Dan Kelly said small business confidence is near record lows, with the CFIB forecasting a challenging second quarter.
Still, Kelly acknowledged that both Carney and Conservative Leader Pierre Poilievre addressed concerns around US tariffs with seriousness.
He said the minority outcome provides “a degree of political stability.”
Kelly added that small businesses are looking for tax relief, reduced red tape and economic certainty. He urged the government to direct counter-tariff revenues to support businesses and to legislate the elimination of the carbon tax.
However, he said uncertainty around tariffs may justify the government’s cautious approach. “It’s important that the government keep its powder dry,” Kelly said.
Canadian Chamber of Commerce president Candace Laing said the US-Canada trade conflict has “disrupted the global trade order and broken the status quo.”
She stated that Canadians concerned about affordability need stability and a clear plan.
“We need Canada’s new prime minister, and all opposition parties, to put aside political differences and protect Canada’s economic security and resilience,” said Laing.
The Business Council of Canada urged Carney to focus on stabilising Canada’s US relationship and speeding up the USMCA renewal.
The Council also called for Canada to diversify its export markets and supply chains to reduce dependence on a single trading partner.
The United Steelworkers union said the government should prioritise protecting and creating union jobs, rebuilding the industrial base, and ensuring fairness for working people.
According to BNN Bloomberg, business leaders said a majority government would have been the preferred outcome for economic stability.
Lisa Raitt of CIBC Capital Markets said frequent minority outcomes in recent elections create uncertainty. “You want to see a little bit more longevity,” she said, noting that majority governments “have a lot of power and a lot of ability to get the big projects... done.”
John Manley, chair of Jefferies Canada and former finance minister, said the result is “pretty close.”
He said minority governments tend to function on an issue-by-issue basis and could last if Carney governs “for all Canadians.”
On trade issues, Manley stated Carney may get cross-party support in negotiations with Trump.
He noted that Canada already has a trade agreement with the US, signed during Trump’s first term, and Trump “just ignored it.”
Manley said Carney might tell Trump to return to USMCA compliance by removing tariffs on steel, autos and other commodities before beginning new talks.
