2026 Federal Spring Economic Update: Highlights and Takeaways for CPAs
April 29, 2026
It’s been exactly one year since Prime Minister Mark Carney won his first election and returned the Liberal Party to power. In that year, the government has not wavered from its single-track focus: leveraging public spending to build up Canada’s economic resiliency in the face of a more uncertain world.
To quote the Prime Minister, Canada is “focused on what it can control.”
Calling back to the building of the Canadian Pacific Railway, the Spring Economic Update 2026, Canada Strong for All, is a signal that it’s full steam ahead for the government’s investment and infrastructure agenda.
Canada Strong For All is designed to address some of the underlying headwinds facing the country and demonstrates moderate improvement in the government’s fiscal position. But, without major policy reforms, including tax reform, switching Canada to a higher speed track will continue to be a challenge.
Canada’s Economic Outlook
The Spring Economic Update 2026 projects a Canadian economy that has held up better than expected through 2025. Looking ahead, it forecasts modest GDP growth, a gradually declining unemployment rate and slightly higher inflation than forecast in Budget 2025. Trade tensions, tariffs and global instability continue to weigh on the economic outlook.
Real GDP growth for 2025 came in at 1.7%, slightly above the 1.6% projected in Budget 2025. Projections for 2026 onward have been revised downward: 1.1% for 2026 (down from 1.2%), and 1.9% for 2027 (down from 2.0%). Growth holds steady at 1.9% in 2028 (no change), with 2029 seeing a slight downward revision to 1.9% (from 2.0%).
Employment performance and projections show improvements: the unemployment rate for 2025 was 6.9% (projected to be 7.0%), projected to be 6.5% in 2026 (down from 6.8%), 6.2% in 2027 (down from 6.4%), and hold steady at 6.1% for 2028, and 6.0% for 2029.
Inflation, measured by the Consumer Price Index, is expected to rise in the short term to 2.5% in 2026 (up from 2.0%), before easing to 1.9% in 2027 (down from 2.0%), and then settle at 2.0% through 2030.
Fiscal Outlook
The federal government is projecting a $66.9 billion deficit for 2025-26 (representing a deficit of 2.1% of GDP), an improvement of $11.4 billion compared to the $78.3 billion forecast in Budget 2025 (which would have been a deficit of 2.5% of GDP). The improvement reflects stronger economic growth and higher revenues than projected in Budget 2025.
New spending in the Spring Economic Update totals $37.5 billion over six years, starting in 2025-26, with 45% of this spending directed to affordability initiatives, including the Canada Groceries and Essentials Benefit, housing supply measures, and a temporary suspension of the federal fuel tax.
The deficit is expected to narrow gradually but remain elevated throughout the forecast period. It is projected at $65.3 billion in 2026-27, $63.1 billion in 2027-28, $57.7 billion in 2028-29 and $53.2 billion by 2030-31. The federal debt-to-GDP ratio is now expected to peak at 41.9% in 2028-29 before easing to 41.6% in 2030-31; more than a full percentage point below projections in Budget 2025.
Investment and Canada’s Competitiveness
Wealth Funds and Financing Workers
The locomotive powering the Spring Economic Update is the Canada Strong Fund. The first national sovereign wealth fund in Canada’s history, the Canada Strong Fund will be seeded with $25 billion over three years, financed through deficit spending, to attract capital investment into the government’s priority projects. The Fund will be managed by an arm’s length Crown corporation, and a dedicated Canada Strong Fund Transition Office to lead an engagement with market participants and regulators to finalize details.
To reduce the risk of duplication, the government has also announced a mandate review for other organizations within the federal financing ecosystem including the Canada Infrastructure Bank, Export Development Canada, the Business Development Bank of Canada and the Canada Indigenous Loan Guarantee Corporation.
Of note, the Canada Strong Fund will offer a retail investment vehicle for Canadians, with the Prime Minister comparing the opportunity to government bonds. There has long been calls for a sovereign wealth fund for Canada, but with details to be announced in the coming months, whether it will serve as an effective catalyst for investment is yet to be seen.
The Canada Strong Fund is one of a suite of investment measures in Canada Strong For All. The Canadian government, in partnership with the Canadian Pension Plan and the Public Sector Pension Investment Board, will host Canada’s first Investment Summit in September of 2026, focused on priority sectors, including energy and critical minerals, artificial intelligence, defence, and infrastructure.
The government also announced the launch of a Sustainable Finance Conference, hosted by the Canadian Climate Institute, to bring together international and domestic players in the sustainability space.
Delivering on the government’s ambitious infrastructure plan will require more than capital. It will also require workers. Announced in the Spring Economic Update, the government’s Team Canada Strong initiative is designed to train more skilled trade workers for Canada’s housing, infrastructure, resource development and defense needs by 2030-31. The government is investing up to $6 billion over five years, including paid, entry-level trades-related work experience for youth aged 15 to 30 and wage subsidies of up to $10,000 for their first-year salary.
A Competing Priority
Economists and policy experts have been blowing the whistle about Canada’s anemic productivity and lack of competition for years. One of the rail anchors holding back our economic engine is a lack of competition.
The Spring Economic Update announced the government’s intention to launch a “Whole-of-Government Competition Plan.” While further details have been promised in the coming months, the plan’s stated goal is “removing inefficient government policies that impede competition arising from regulation, procurement and industrial support.” The plan’s inclusion is a positive signal that the government recognizes that a lack of competition is a drag on growth, productivity, living standards and affordability.
Affordability
With affordability issues still top of mind, “Making Life More Affordable for Canadians” is one of the four pillars of the Spring Economic Update. None of the initiatives included in the update are net new, having been announced earlier this year in response to stubbornly high inflation and geopolitical developments putting pressure on household budgets.
Canada Groceries and Essentials Benefit
Announced in January 2026, this benefit builds on and renames the Goods and Services Tax (GST) Credit to provide $11.7 billion in additional support over 6 years under the Canada Groceries and Essentials Benefit. Those eligible to receive the enhanced credit will be receiving a top-up payment, to be issued June 5, equivalent to a 50% increase in the 2025-2026 value of the credit. Beginning in July, the quarterly rebate will be increased by 25% and remain at this elevated level for five years.
Temporary Federal Fuel Excise Tax Suspension
In response to rising oil prices due to the Mideast conflict, the government announced earlier this month that it is temporarily suspending the federal fuel excise tax on gasoline ($0.10/L), diesel and aviation fuel ($0.04/L) from April 20 to September 7, 2026. This measure is expected to reduce government revenues by $2.4 billion in 2026-2027.
Measures to Reduce the Cost of New Homes
Along with federal financial support announced in March 2026, the government is introducing additional measures in the Spring Economic Update intended to accelerate homebuilding projects by reducing costs.
To advance the building of more purpose-built rental housing, the government is accelerating over $7 billion in low-cost loans under the existing Apartment Construction Loan Program through the Canada Mortgage and Housing Corporation. The government also announced that, prior to the 2026 Budget, it will consult on possible additional financing measures to support further increases in the stock of owner-occupied housing.
To make first-time home ownership more affordable, the government is extending the grace period before homeowners must start repaying their Home Buyers Plan withdrawals from their RRSP from 2 years to 5 years for withdrawals made between 2026 and 2028. This extended grace period already applies to withdrawals made between 2022 and 2025.
This new measure builds on the previously announced $1.7 billion federal government contribution to the provinces and territories to reduce development charges, new home construction levies and other measures that can increase the cost of new home construction.
Tax Updates
While the Spring Economic Update advances the government’s priorities on housing, affordability and investment, it does not introduce measures regarding meaningful tax reform, nor does it provide any further detail on the corporate tax review promised in the Liberal Party election platform. With Canada’s productivity growth continuing to underperform, the case for practical bold reform as laid out by CPA Ontario in Tax Reform for Growth in Canada, remains as urgent as ever.
The Spring Economic Updates does include a small number of targeted tax measures, summarized below.
Making the Employee Ownership Trust Tax Exemption Permanent
The Spring Economic Update proposes to make permanent the $10 million capital gains tax exemption for individual business owners who sell their company to an Employee Ownership Trust or worker cooperative. The exemption was introduced as a temporary measure in the 2023 Budget and was scheduled to expire at the end of 2026.
Reducing the CPP Contribution Rate
The Spring Economic Update proposes to reduce the base Canada Pension Plan (CPP) contribution rate from 9.9% to 9.5%, effective January 1, 2027. Because the CPP is jointly stewarded by the federal and provincial governments, any change to the contribution rate requires legislative amendments and the agreement of participating provinces, both of which were secured through the 2025-2027 Triennial Review.
For an employee earning $70,000 a year, the change translates to roughly $133 in annual savings, with matching savings for employers.
Enhanced Labour Mobility Deduction for Tradespeople
To support tradespeople moving to another temporary job location, the government is both making the labour mobility deduction for tradespeople easier to access and more generous.
Effective for the 2026 and subsequent tax years, a tradesperson who relocates at least 120 kilometres closer to a job site (previously 150 kilometres) can claim the labour mobility deduction for tradespeople. The annual limit on expenses for this deduction will also increase to $10,000 (from $4,000), with the limit to be indexed to inflation going forward.
Automatic Tax Filing
Billed by the government as an affordability measure and adopting one of the recommendations CPA Ontario advocated in Tax Reform for Growth in Canada, the Spring Economic Update confirms the automatic filing of returns for low-income Canadians by the 2026 tax year, with pre-filled returns for up to 5.5 million low-income Canadians starting in the 2028 tax year.
Upcoming National AI Strategy
The Spring Economic Update unveils the six pillars of the long-anticipated updated National AI Strategy, first announced in fall 2025. The pillars include:
- Protecting Canadians and Safeguarding our Democracy
- Empowering Canadians
- Powering AI Adoption for Shared Prosperity
- Building the Canadian Sovereign AI Foundation
- Scaling Canadian Champions
- Building Trusted Partnerships and Global Alliances
The updated strategy follows a 30-day public consultation that drew more than 11,000 submissions, including one from CPA Ontario. First promised by Minister Evan Solomon in fall 2025, and repeatedly delayed since, the strategy still has no release date.
Establishment of the Financial Crimes Agency
In the 2025 Budget, the federal government announced that it will be establishing a new Financial Crime Agency. On April 27, 2026 the federal government introduced legislation to establish the agency and sets out its mandate to investigate serious and complex financial crimes, such as money laundering, and to recover the proceeds of crime.
The agency will have the capacity to lead investigations independently or in collaboration with provincial, territorial and international law enforcement partners. The government also announced its intention to explore new criminal justice reforms to support the investigation and prosecution of complex financial crimes. The government is providing over $325 million over five years starting in 2026-27 to support the establishment of the agency.
The government has also announced the development of a whole-of-government National Anti-Fraud Strategy to combat fraud through prevention, detection, disruption and response.
Conclusion
From encouraging Canadians to invest in a sovereign wealth fund to creating new training opportunities, Canada Strong For All is an invitation for business and workers to get on board with the government’s plan.
The question remains whether that plan is enough to release the brakes on the Canadian economy. New infrastructure can help lay the track for future growth, but more ambitious action on entrepreneurship, innovation and tax reform will be needed to clear the signals for more investment in Canada.