The Carney government’s first budget is a familiar tale of what is said and what is really done
As Ottawa rolled out the media campaign leading to the release of the 2025 Federal Budget, one thing became clear: this is the Carney government’s attempt at a generational economic shift that will send Canada on a brand-new development trajectory.
This message was repeated by high-profile ministers, loose-lipped staffers, and hopeful stakeholders. But, as is often the case in Ottawa, words do not mean much. Numbers do, and that is why this is such a landmark moment in the parliamentary season.
This year’s budget also carries unusual importance because of what is happening beyond Canada’s borders. Trade tensions with the United States have dominated headlines for months, and the Canadian automotive sector is among the industries most vulnerable to the resulting economic uncertainty.
With CUSMA up for review and the White House taking a steadily more aggressive tone on tariffs and the overall trade relationship, Canada needs to show that it can compete and progress on its own terms. That underlines the need for a new economic paradigm rooted in sovereignty, diversification, and productivity.
For Ottawa, the budget offered a chance to send a global signal of stability, economic opportunity, and untapped potential — to reassure current and attract future investors about Canada’s economic direction.
It is no surprise, then, that the 2025 budget has received mixed reviews. Beyond the legitimate concern about the growing deficit, now standing at $78.3 billion, the plan proposed by the Carney government isn’t as transformational as the Liberal leadership suggested.
In fairness, the ambition is there, but the means to accomplish the targets are not fully defined. There are still many hurdles and costs to identify and overcome. The budget hints at major strategic investments supported by a $60 billion savings and revenue strategy. The problem is that, once again, the approach lacks coherence.
For auto dealers, a government focus on improving productivity is welcome news. They are among the businesses that have invested most in making their operations agile, integrating AI systems, and aligning with the transition toward a more EV-dependent market.
After months of signalling a desire to spend more on capital investments — which would strengthen Canada’s productivity — only $8.3 billion of the announced $27 billion increase represents new investments. Most of the funds are transfers to other entities, such as provinces. This will help Canadian productivity, but not bring about the seismic change promoted before the launch.
Where the government is consistent with its pre-budget messaging is in putting productivity at the centre of Canada’s new economic strategy. For auto dealers, a government focus on improving productivity is welcome news. They are among the businesses that have invested most in making their operations agile, integrating AI systems, and aligning with the transition toward a more EV-dependent market.
Canada’s productivity problem is not new. For years, businesses here have invested less per worker than their peers abroad, particularly in the United States, and that gap continues to widen. In a smaller economy, every invested dollar needs to count and generate results. Productivity is a reflection of that dynamic.
The budget itself points out that Canada now invests only about two-thirds as much capital per worker as the average among industrialized nations.
That number explains much about why costs are higher and growth slower than in the U.S. In a trade environment where Canada can no longer rely solely on its historical relationship with its southern neighbour, it is imperative that foreign investors see this country as one where business is both encouraged and easy to conduct, and where there are significant investments in the essentials: capital, workers, and infrastructure.
Canada has historically struggled on both sides of that equation, and this budget presented itself as a remedy. Will it come to fruition? Business leaders, including automotive dealers, will have to assess that in time.
One measure introduced by Ottawa that could benefit auto retaiers is a new set of enhanced tax incentives aimed at increasing capital investment. Companies that invest in new machinery, technology, or equipment will be allowed immediate expensing — a 100 per cent first-year writeoff — for manufacturing or processing buildings.
Auto retailers will, however, benefit from operating in an environment where the marginal effective tax rate — the tax burden on an additional dollar of investment — is coming down to 13.2 per cent from 15.6, the lowest in the G7.
The measure is meant to encourage investment now rather than later and is being compared to accelerated expensing programs in other countries. The details, however, are still to come, and automobile dealers will have to wait for the fine print to understand whether they qualify and how it will apply.
Auto retailers will, however, benefit from operating in an environment where the marginal effective tax rate — the tax burden on an additional dollar of investment — is coming down to 13.2 per cent from 15.6, the lowest in the G7.
The timing of this announcement is not accidental. The government needed to show that it has a plan to raise productivity without losing its focus on affordability.
By doing so, it hopes to calm business concerns about competitiveness while keeping public opinion on its side. The Liberals also know this issue plays well politically. Productivity may not be a word that stirs emotion in the public sphere, but Canadians increasingly feel the effects of stagnation in their daily lives. Slower growth means slower wage gains, weaker public finances, and fewer opportunities.
For the automotive industry, the message is mixed. On one hand, the government’s commitment to long-term investment and productivity should eventually benefit dealers through a stronger economy and improved infrastructure.
On the other hand, the budget did nothing to address the immediate affordability and cost pressures facing both buyers and auto retailers. There was no change or repeal of the EV mandate, which has been identified as a major driver of price increases, nor was there clear direction on tariffs affecting imported vehicles and parts. The budget also added to the government’s inconsistency by maintaining the luxury tax on vehicles while removing it for truly luxurious items such as planes and boats.
Politically, the budget sets the stage for a tense few months in Ottawa. The Carney government is trying to project stability while managing a sizable deficit and a divided Parliament. That balancing act will define much of its first year in office.
For the Prime Minister, the risk lies less in the market reaction than in the growing impatience of voters who have been promised, and now expect, tangible results. The Ottawa political machine is extremely skilled at showing and telling. It will be up to auto dealers and other stakeholders to make sure they get the doing part right.
