Bank of Canada governor Tiff Macklem said he would not comment directly on measures in the federal budget during a scheduled appearance before the House of Commons finance committee on Wednesday.
But he told members of Parliament he believes the budget got the diagnosis right on what ails the Canadian economy: flagging productivity and low investment levels.
Macklem said that to boost growth and make up for the hit from U.S. tariffs, Canada needs to create conditions that encourage private investment.
That’s a job best suited to targeted fiscal policy, he said, rather than the sweeping effects of monetary policy and changes in the Bank of Canada’s benchmark interest rate.
“I think what’s going to be important in moving forward is the quality of those investments, the quality of that spending, and the execution,” Macklem said.
“That’s not the responsibility of the Bank of Canada, but it is the responsibility of parliamentarians.”
Macklem’s testimony came after Prime Minister Mark Carney defended his first budget as a “bold response” to a global moment of economic disruption, replying to critics who question the ambition of Ottawa’s plans.
“These profound changes require a bold response, and that’s what we got yesterday,” Carney told a news conference in a public transit yard in Ottawa.
The budget predicts that, in terms of real GDP, Canada’s economy will be 1.8 per cent smaller by the end of 2027 than forecasts suggested late last year — before U.S. President Donald Trump launched his global tariff campaign.
Carney claimed measures in the budget will help Canada meet a lofty goal of attracting $1 trillion in investment over the next five years. That level of investment, if it comes to pass, would more than offset the disruption caused by U.S. tariffs.
“Now is not the time to be cautious, because fortune favours the bold. It is a time to get big things done for Canadians, and get them done fast,” he said.
Wednesday marked the start of Carney’s campaign to sell Canadians on the first government budget released under his watch.
He was joined at the event by Nova Scotia MP Chris d’Entremont, who left the Conservative caucus to join the Liberals on Tuesday, moving them within two votes of a majority.
They’ll need to find those votes — or abstentions — if they are to get the budget passed and survive a confidence vote which could trigger a federal election.
The budget includes nearly $90 billion in net new spending over five years, after government cost-savings goals are taken into account. The plan has received a lukewarm reception from opposition leaders.
Conservative Leader Pierre Poilievre lambasted the Liberals in question period Wednesday over high levels of spending and maintaining the industrial carbon price, which he argues places undue burden on manufacturers and raises costs for Canadians.
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Poilievre said that the $78.3 billion deficit in the budget is the largest in Canadian history outside the pandemic.
Long-time Liberal adviser Tyler Meredith pointed out on social media that, according to the Bank of Canada’s inflation calculator, then-prime minister Stephen Harper’s 2009-10 budgetary deficit of $55.6 billion is larger than the 2025-26 deficit, in today’s dollars.
Poilievre signalled Tuesday that the Conservatives would introduce a budget amendment to cut bureaucracy and kill the industrial carbon price.
Typically the Official Opposition introduces the main amendment to a budget and the third party in the House of Commons introduces a subamendment.
But in the midst of debate over the budget in the House of Commons Wednesday Poilievre failed to table his amendment, opening the door for the Bloc Québécois to do so instead.
Its amendment calls on parliamentarians to reject the budget in its entirety, primarily for a lack of measures targeting Quebec.
The Conservative party confirmed to The Canadian Press it would table a subamendment to the Bloc’s amendment Thursday morning. The first budget vote will take place Thursday evening, on the Conservative subamendment, and the second vote will be on the Bloc amendment on Friday.
It’s not clear at this point if the government will deem the amendment votes to be confidence matters, but the main vote on the budget will be. It won’t take place until the week of Nov. 17, as the House is on a break for Remembrance Day next week.
Carney said there’s “a lot in this budget” that reflects input from other parties. He said there’s alignment across the government and opposition parties on aspects of the budget.
Peter Bethlenfalvy, Ontario’s finance minister, said Wednesday he spoke to his federal counterpart after the budget was released and described the spending plan as lacking “some ambition.”
“It’s less transformational. It’s more tinkering,” he told reporters at Queen’s Park.
Bethlenfalvy said the budget falls short on infrastructure support for the provinces and further tariff relief for the auto sector that supports the economies of many southwestern Ontario cities.
Carney was touting a 10-year, $51 billion fund for local infrastructure — bridges, roads, hospitals and transit systems — in Ottawa on Wednesday morning.
TD Economics said in a report that much of the budget’s new investments, such as the local infrastructure fund, are the result of reallocation from other pools of funding rather than net new money.
TD Bank economists said only $9 billion of the funding for local infrastructure over five years in Budget 2025 was new money.
The federal government is pitching an increase in capital funding from $32.2 billion this year to $59.6 billion by 2029.
In commentary published online in The Hub, University of Calgary economist Trevor Tombe pointed out that only $8.3 billion of that increase is actually new, and much of it is spent on transfers to provinces.
“That’s roughly 0.2 per cent of GDP and in line with commitments seen in many previous budgets. So, for all the hype, this budget does little that’s ‘generational,’” Tombe wrote.
Carney pushed back Wednesday against critics and analysts who said the budget does not do enough to encourage investment.
He argued the budget offers a “sea change” by reducing operational spending growth from eight per cent annually to less than one per cent while ramping up government capital investment.
Adjustments to the tax code allowing businesses to write off their own capital spending in the first year also make the country a more attractive place to invest in the face of protectionist U.S. policies, he said.
“Look, I’ve been around a lot of budgets,” he said. “This is a very different budget.”
The TD Economics report said the accelerated capital spending expensing measure and enhancements to the existing scientific research and experimental development tax credit “do put Canada on somewhat more even footing” with the United States.
U.S. President Donald Trump’s One Big Beautiful Bill Act also included immediate expensing for businesses.
Tombe called that measure — dubbed the “productivity super-deduction” in the budget — a “bright spot” that could help spur manufacturing investment in Canada.
“Unfortunately, while a real step to encourage private investment, potentially boosting GDP by 0.2 per cent (the government reckons), it’s a temporary measure, so its long-term impact is muted,” he wrote.
