Ottawa’s budget promises to spur business investment. Will it?

Experts are cautiously optimistic that the federal government’s plan to spur business investment will move the needle on better productivity and economic growth, but say it doesn’t come without risks.

This week’s budget, Prime Minister Mark Carney’s first since taking office, looks to make Canada’s economy a more attractive place to invest by promising billions of dollars for infrastructure and new tax opportunities for businesses.

The measures should have a positive effect on investment, but it remains to be seen how the plan will be executed, said Rachel Samson, vice-president of research at the Institute for Research on Public Policy.

“The question is, will the private sector respond to these initiatives and will they invest? (Is it) enough to overcome some of the barriers they face, such as economic uncertainty (and) trade uncertainty? Have they calibrated these incentives to be enough to push businesses over the edge towards investment?” she said.

The measures in the budget could drive various forms of private investment ranging from smaller investments in automation to larger investments in new manufacturing capacity that help supply a growing defence industry, Samson said. She added that government spending on major projects could also create opportunities for construction services as well as suppliers.

“Every public dollar invested could have a ripple effect that creates multiple private sector opportunities,” she said.

The budget promises to enable $1 trillion in total investment, which it says could raise future gross domestic product and purchasing power for Canadians.

Samson noted that in September, the Institute for Research on Public Policy recommended the government develop an industrial strategy to target some areas holding business back from investing. She said in the latest budget, the government is “checking a lot of the boxes” it recommended.

The budget plan includes new tax credits, including “productivity super-deduction” measures that allow businesses to write off a larger share of new capital investments. The manufacturing sector was among groups looking for such incentives in the budget in hopes of better competing with similar ones in U.S. President Donald Trump’s One Big Beautiful Bill Act — a landmark piece of U.S. legislation attempting to lure more businesses to relocate south of the border.

It also enhances the Scientific Research and Experimental Development tax incentives, which the government said will help businesses conduct research.

“Certainly, things like the tax incentives that they’ve implemented should make a difference there, encouraging businesses to make those investments in equipment and technology that will improve their productivity and Canada’s productivity,” Samson said.

She added that the productivity super-deduction includes measures for “immediate expensing of productivity-enhancing assets,” such as patents and data network infrastructure.

“Those types of things have the potential to improve the productivity of businesses. We know businesses are not investing enough in Canada in those types of things. Hopefully, this is enough to tip the balance and have those businesses invest.”

However, she noted one area of concern is how the strategy will be executed given that the public service is expected to cut back on staff, spending and the use of outside expertise.

“All of that is going to present a big challenge to executing this effectively, and the execution is going to be critical to success,” she said.

The government says it will slash the federal public service by 40,000 positions, or about 10 per cent, over the next three years.

Mahmood Nanji, a policy fellow at the Ivey Business School and a former associate deputy minister at the Ontario Ministry of Finance, said the government’s strategy is anchored around growing the economy to offset various shocks, like tariffs, a slowing global economy and Canada’s sluggish growth.

“It is an investment-led budget and the government is definitely making a big bet on these investments catalyzing private investment and other institutional investment as well,” he said.

Nanji noted there are some large-scale investments in the budget, pointing to things like $280 billion earmarked for new infrastructure projects over five years, along with $110 billion going toward productivity and competitiveness over that same time period.

“Does it go far enough? People will say, ‘I think it’s on the right track, but more could be done,’” Nanji said.

While tax credits are likely to be received positively, Nanji said one piece missing from the budget was a review of the overall tax system, highlighting that it has been decades since it was last reformed.

“Our economy has fundamentally changed during that period of time. We need to look at our tax system to see how we best incentivize businesses and individuals,” he said.

While it will take time to determine whether the government’s plan is working or not, Nanji said indicators of success will include real GDP growth, along with growth in real GDP per capita — an indicator of a nation’s standard of living.

“The other indicator is that the number of jobs you have in the economy and whether you’re seeing companies staying here or whether they’re starting to pack their bags and go south or to other markets,” he said.

Given the circumstances, Nanji said he thinks the budget presents a credible plan to spur investment, but not one without risks. He said risks span across issues like how the programs are rolled out to trade uncertainty, and fiscal risks that could be worsened by economic pressures.

“The government is making a big bet by putting in a lot of money with a view that if the economy grows, the fiscal picture becomes better,” he said.

“But suppose the economy doesn’t grow and you’ve got unemployment, and the government has to do something there. Then you dig yourselves a hole, both on the economic and the fiscal side of things.”

Meanwhile, Samson said the budget comes as the global trade order is “recalibrating” and countries are competing to gain a foothold in the new order.

“Canada has a tough road ahead to position itself to succeed and position businesses to succeed,” she said.

“A lot of these measures are really important because Canada is facing so many risks that could affect our economy, but also affect the revenues that governments receive that are critical for supporting social programs and the quality of life in Canada.”

This report by The Canadian Press was first published Nov. 6, 2025.

Daniel Johnson, The Canadian Press